should i pay UK VAT on commision earnt on traffic sent to US companies

[rolands]

hi

my situation is that i am UK based and send traffic to US based companies websites who either do there own billing or use people such as commision junction etc. so basically my entire revenue is commision on sales sent to affiliate programs, which makes my situation a little unusual.

i've got no choice but to go vat registered and i want to avoid paying vat out of my own pocket on money i make from the US, which i've been told may be what will happen. which seems strange and very unfair to me. i can charge vat to the UK/EU companies i deal with but not the US ones.

is anyone else in this situation? if so how did you phrase what your services were, to avoid paying vat out of your own pocket on US earnings? I've got a good accountant who will make the appropriate enquiries for me, but i wanted to ask around first, to find out how to describe what i do to the vat office to avoid paying it out of my own pocket.

any help on this will be GREATLY appreciated.

thanks in advance

roland

[Essex_boy]

Ok this is NOT advice on what you should do but merely an indication as to which way you MAY like to look.

I assume that your CJ money is at least £3000 per year.

If so establish a US based corporation in delaware - if it doesnt trade in Delaware you wont pay corporation tax. Account filling rules for INC's that trade EXCLUSIVLY out of state are very lax - small fine should you fail to file.

With the US income bring it back as dividends to yourself - you wont pay National Insurance on the sum - Or charge the US firm for your time + travel 'expenses' at 40p per mile. These expenses are then tax free. Get the drift - buy the computer through the US firm etc etc etc

[rolands]

thanks for your reply. that's a helpful suggestion, i will look into that further.

thanks again

roland

[Serchen]

Hi Roland,

Not quite following you as to what the problem is for you. You only pay VAT on certain goods "you" purchase in the EU. Not on income recieved from clients.

Am I missunderstanding your issue? I'm sure I can help you out on this as we've been dealing with clients in the US over the internet for nearly 6 years.

James

[rolands]

hi serchen

sorry i probably didn't make myself very clear...

well basically i've got to register for VAT as my turnover exceeds the limit. now if i was selling a product or service in the UK to someone and i was VAT registered, i must charge that person who's buying the product/service VAT.

however a lot of my business is with the USA, and is commision earnt with various affiliate programs that i send traffic to. i am unable to charge these USA affiliate programs VAT on my earnings. but i have been told that i may have to pay the VAT for these transactions out of my own pocket. i'm hoping this isn't true but wanted to find if anyone can clarify the situation for people in my situation?

thanks in advance

roland

[Serchen]

OK,

I think I'm with you now. I know from our own experience that basically you only pay and charge VAT on services within the EU.

So for example if you are buying ad space on google (as they trade within the EU) you must pay VAT on the traffic recieve as a result of the ads. Even if you redirected it to a clients site in the USA.

But the VAT you pay on that service you claim back as long as you are VAT registered on your next return.

Am I on the right track or did I missunderstand you again?

James

[rolands]

hi james

that makes sense, paying/charging vat only within the eu/uk, that's what i thought.

i think where the confusion lies with my accountant is that because my earnings are commision on sales, where the location of the customer buying something that i am recieving commision on is difficult to prove. maybe i should not mention commision and say i am selling traffic to a us company (which i am in a sense).

thanks for your help

roland

[Serchen]

You are in for a fun time. The chances are if your selling to the US and claiming VAT back on traffic you buy in the EU, you will be a net claimer of VAT. In other words you will be making a claim to customs and not paying them on your VAT returns. Ultimately this will lead to a VAT audit. Guaranteed within your first 3 years trading.

Tell your accountant that and he/she will most likely faint at the prospect. I remember our first audit like that in 1999, the VAT office sent 3 guys round in grey suits to try and get a handle on what we did and how they could get some money out of us in the future. They stayed for 3 days! Thankfully they left empty handed.

[rolands]

hi serchen, thats worrying lol :( no i think i should be ok, all my traffic is generated myself with my own sites and seo, i don't buy any traffic. and i do deal with uk companies so i will have some vat i can charge, and my expenses are minimal and most of this is from the US, such as servers, domain names etc. so i think they will get a little bit from me ;)

thanks for your input on this, it's been very helpful.

roland

[Serchen]

No problem Roland. Glad I could be of some help.

James