VAT (Overseas Aspects)

Question 1

is there a difference in VAT treatment between the UK and EU?

Answer 1

no

Question 2

is there a difference in treatment of supplies between EU countries?

Answer 2

yes, northern ireland remains part of EU with regards to VAT treatment of the supply of goods - but not services

Question 3

from a VAT perspective, how are imports/exports between GB and NI treated?

Answer 3

in the same way as movement around GB

e.g., if a welsh business sells goods to a NI customer, VAT will be charged as normal

NI customer will be able to reclaim VAT like normal, if they use the goods for business purposes

Question 4

exports relate to…
imports relate to…

Answer 4

exports = sales overseas
imports = purchases from overseas

Question 5

what does the VAT treatment of overseas transactions depend on?

Answer 5

whether the supply is of goods or services

Question 6

how do imports and exports work for the supply of goods?

Answer 6

exports:
- supply is zero rated as long as seller holds evidence on how/where the export was made
- customer accounts for output and input sales tax in own country

imports:
- importers account for VAT as they bring goods into their own country either at point of entry or by postponed VAT accounting
- if importer is VAT registered, can recover this input VAT on the next VAT return in normal way

Question 7

postponed VAT accounting?

Answer 7

importers can account for the import VAT incurred on goods purchased from overseas on their next VAT return

as long as goods have been purchased for business purposes

the delay in recognising the import VAT provides a crucial cash flow saving for businesses as payment of VAT no longer needs to be made up front when goods enter the UK

e.g., point of entry = pay VAT on point of entry

e.g., postponed VAT accounting = include both input & output VAT on next VAT return

Question 8

what is the VAT treatment of supply of services overseas?

Answer 8

depends on the place of supply

for land related services, the place of supply is where the land is situated

so if the land is situated in the UK, the supplier must charge VAT using the UK rates

Question 9

how does supply of overseas services work to non-business customers?

Answer 9

• place of supply is where supplier’s business is situated
• UK VAT registered supplier will account for UK output VAT, regardless of where the customer is situated

Question 10

how does supply of overseas services work to business customers?

Answer 10

• place of supply is where the customer’s business is situated
• UK VAT registered supplier will not charge VAT as it’s outside the scope of UK VAT, and customer will account for sales tax in their own country
• UK VAT registered customer will account for UK output VAT on supply under the reverse charge system

Question 11

reverse charge?

Answer 11

reverse charge changes the basis of the VAT charge from the origin system to destination system and is known as a tax shift

the output VAT accounted for can be recovered as input VAT, if the business makes taxable supplies

Question 12

destination system?

Answer 12

place of supply = where customer’s business is situated

Question 13

origin system?

Answer 13

place of supply = where supplier’s business is situated