Forum Moderators: buckworks
But I am very confused about the overall VAT issue and how it works as i've never been involved in VAT before. I've heared about the new EU VAT Directive that takes affect from 1st July 2003, but does this affect me? does the £52,000 threshold still apply? if so, i guess i have nothing to worry about yet. However, I would like to prepare for when the time comes so if anyone can please give me some advise on exactly what is required I would really appreciate it.
Many Thanx
Cheers
Linda James
as such you have nothing to worry about if you are under the VAT threshold.
however at the same time you are losing 17.5% on many of your purchases, which in effect you could be claiming if you were VAT registered.
in other words, you HAVE to be registered when you reach/hit the threshold, but you CAN register earlier and claim VAT back on the purchases.
as for the whole 1st July thing, I will let someone else give the finer points...
Shak
...as for the whole 1st July thing, I will let someone else give the finer points...
As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.
If you trust your accountant follow his guidance and forget about VAT until you can see yourself going over the threshold.
georgeek, you mentioned that the new EU directive doesnt apply to me as I am in the UK, but how comes eBay and other UK websites have started actioning the new EU directive. I know that I am not currently VAT registered so it shouldnt bother me. but... I would like to get my website 'set up' in a way that it is ready for VAT (when i go over the £52,000 threshold.)
At the moment my website has been setup just as a simple shop where they can order online (NO VAT... NO CONFUSION..) but as I will have customers from all over the world, i want the website to be ready to collect VAT when i register for VAT, but i dont know exactly who I will need to collect which type of customers are VAT exempt. I've also heared that different customers from different EU countries have different rates that they have to be charged.
Really appreciate everyones help
Cheers
Linda
The (charming) people from VAT do not charge for advice. If you live or work near a VAT office, then drop in and get the free advice straight from the horses mouth. Save you the hassle of worrying about conflicting advice here ;)
The VAT threshhold for compulsory registration is now, I believe, £56,000. Filling up the forms is time consuming, and you are liable to fines for late return of forms. So you need to weigh pros and cons of registration if you do it volunarily under the threshhold.
As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.
I don't think you're correct - the new directive is about changes in the place of supply rule; and therefore has to concern UK and other EU businesses, although maybe not as much as non-EU companies!
1.4 Who is affected by these changes?
You will only be affected by these changes if you supply electronically supplied services or broadcasting services to, or receive them from, other countries whether EU or non-EU.If you are a UK supplier of these services, you will no longer be required to account for VAT on supplies to:
businesses in other Member States; or
non-EU customers (except, in certain circumstances, where they are used and enjoyed in the UK).
(from [hmce.gov.uk...]
I seriously would get onto the HMCE (VAT) website
[hmce.gov.uk...] and go through the links with a fine tooth comb and then pester them for as much information as you need to know.
If it is a blanket 17.5% then the set up is going to be easier than if each country has a different VAT.
I would dare say that a few sites are already up and running, finding them is a different matter but VAT man might be able to point you in the right direction.
You know what, as you are going to be an unpaid tax collector, get the experts to spell it out for you :)
Cheers
Linda
As your business is 'set up' in the UK the new EU VAT Directive is of no concern, it does not apply to UK businesses.
I don't think you're correct - the new directive is about changes in the place of supply rule; and therefore has to concern UK and other EU businesses, although maybe not as much as non-EU companies!
The opening paragraph on HM Customs and Excise explanation on VAT On e-Services (VOES) says "VAT On e-Services (VOES) VAT On e-Services is a special Value Added Tax (VAT) scheme for non-EU businesses providing electronically supplied services to EU consumers (that is, private individuals and non-business organisations)."
There is in addition a separate change in EU place of supply rules for electronically supplied services and broadcasting services. The changes are straightforward and are explained quite simply for UK suppliers in this flow chart here [hmce.gov.uk].
With the best will in the world, laymen's advice is conflicting and ingorance is no excuse for breaking the law.
Look at the flow chart in the link of message 12 - it really is that simple.
Any comments would be appreciated
Cheers
Linda
This is the problem with conflicting advice. "Normally" one charges UK rates, 17.5% on all transactions, and the customer in say Ireland accounts for that via their own system under "Vat paid to other European Union suppliers". You do not charge different ratees.
However I am not 100% certain that this applies to cyberspace transactions, so as I said before, try the Vat office (and get it in writing too)
The fact of the matter is; it is a minefield, few of us are qualified to give advice, we may talk from experience but as the goalposts move so does the law.
Advice must be taken from source and nowhere else. :)
Good luck.
If you shot a tax calculator and destroyed it... would the gun be a weapon of maths destruction? :) :)
If you buy something (business related) from another EU state, they charge you Vat on it at their national rate, and you reclaim what you paid in their Vat from UK Customs and Excise on your Vat form (converted to sterling)
Its convoluted, but that's the way it goes - there is a special line for EU vat on your Vat form that is sent in periodically by you to C&E if you are VAT registered.
Get as much information from them while you are keen to do this because you will dread them soon.
"If you are a UK supplier, you will no longer be required to account for VAT on supplies to businesses in other EU Member States & non-EU customers"
Any suggestions?
Cheers
Linda
Don't take this the wrong way but we are internet related people not VAT experts. (unless there is a lurker that may help;) ). We can offer you a view point or case history perhaps, but you really need that information clearing up by the VAT people ... it is so important.
They have more powers than most official bodies and they use their powers, they can make life so difficult - I talk from experience.
They won't accept "blogger from websiteguru.com said it's okay if I don't charge VAT"
You need to rely on your accountant and VATman himself :)
I've just spent the morning looking into this because we want to stop OV and Espotting from charging VAT at source, as we are in another EU country with a different VAT rate. We are also wondering why they have felt entitled to charge it for the last 8 months.
I'll let you know how I get on.
The requirement for businesses trading within the EU has not changed much. In fact if you were selling anything to the EU member states and the cutomer was a VAT registered person/business, you would merely be required to collect their VAT number and check that it was" looked genuine". By this I mean that you check that the format looked ok but was not required to go and verify every number that was put in by the customer. Your customer would then pay the VAT within his own country at the local rate of VAT.
If the customer was not registered for VAT, then you'd charge him the VAT at UK rate. But you'd make a record of the sale as being one going to the EU. The existing VAT return actually asks you to do this (BOX 8 of VAT return), as well as asking you to show own purchases from other EU states (box 2).
For sales outside the EU you automatically Zero Rate the VAT.
This in effect means that you will not be effected much by the new rules. The new rules will effect US based companies (google+aol etc) who are selling digital goods to EU member states. Now they too are being obligated to pay VAT as well.
I hope the above will be of some help, but like everyone else, I'd suggest you rely on your accountant for official advice.
ESpotting have yet to reply (1 week on).
In general, you will charge 17.5% on all sales within the EU. You may not need to charge VAT to non-EU customers, but there is no requirement NOT to charge - therefore you can charge if you want to - it all helps the UK economy! But like others have said, you must see your accountant and check with HMCE.
July 1st has been planned and publicised for a long long time. It affects non-EU companies so shouldn't affect you.
As a brief summary:
Companies like AOL were able to provide services in the UK to UK consumers without charging VAT. They were US companies with a UK "subsidiary" targetting UK customers - to all intents and purposes, the UK "subsidiary" was run as a UK business, but they were technically exempt from UK VAT. I believe that the exemption was caused by "place of service" rules - I believe that AOL dial ups are routed through the USA, that Ebay servers are in the USA etc etc, meaning that because the service was performed outside the UK, they were technically exempt from UK VAT.
This meant they could provide the same services as UK companies, but cheaper - this gave them an advantage over UK companies.
The issue became fairly high profile a couple of years ago when a UK ISP (freeserve?) took HMCE to court for not forcing a US ISP (AOL UK?)to charge VAT. The matter was taken up by the EU, which looked into more aspects of it and came up with the July 1st proposals.
Under July 1st legislation, non-EU providers providing services to EU citizens / companies must register for VAT in the countries they supply services to and charge VAT at the appropriate rate for the country in which the service is used - ie, they must register with HMCE and charge 17.5% to UK citizens / consumers / businesses, they must register with the French VAT office and charge VAT at French rates to French consumers / business etc, and so on.
DISCLAIMER - this is from memory and I can't be certain that this is 100% accurate, but the info is all online if you want to search for it - I don't have time to search and verify everything :(
