Forum Replies Created
-
Posts
-
The VAT implications are very much dependent on the details of the contract between the parties. Presumably your accountant will have seen this.
Although you refer to the other businesses as “partners”, it’s quite rare that events are run as a true partnership – which is a very specific legal structure. More commonly, there are separate businesses supplying services to each other, and most of the arrangements I’ve seen have been one of the following options:
Option 1 – You act as the agent of the other business, selling tickets on their behalf.
If you are the agent, the sale of tickets (for VAT purposes) is treated as being direct between the other business and whoever you’ve arranged the sale to. If the other business is VAT registered, they (not you) will need to declare VAT on the full sale price (£15 in your example). But if they’re not VAT registered, there’s no VAT for them to declare.
In your books, you are supplying a service to the other business. The value of your service is the £5 that you keep, and you’re required to treat that as VATable. Whether it’s “£5 plus VAT” or “£5 including VAT” depends on what’s specified in your contact. If your contact doesn’t mention VAT, it’s likely that you’ll have to treat the £5 as including the VAT – so leaving you with £4.17. You should issue the other business with a VAT document for this, as any that are VAT registered could reclaim the VAT from HMRC.
Option 2 – You are selling the tickets as principal.
If you’re not acting as the agent of the other business, HMRC treat the arrangement as two sales of the tickets. The first sale is by the other business to you for £10, and the second sale is by you to the ultimate buyer for £15.
If this is the case, your sale to the ultimate buyer is likely to be subject to VAT in full. So you’ll have to declare VAT on the £15, leaving you with only £12.50. If the other business selling the tickets to you is VAT registered, they should be able to give you a VAT invoice for your purchase. But if they’re not VAT registered, overall you will be worse off with this option than you would under the agency (option 1) above.
It may be that the arrangements don’t fit either of the options above, in which case you’ll need advice from someone who has sight of the contracts. You could ask your accountant whether they could explain it again, or you could approach a VAT advisor. Either way, get the advice in writing and keep it on file – it will be useful to have in case you ever get inspected by HMRC. And if the advice you’ve been given is too technical, it’s fine to ask them to explain it more clearly!
Hope this helps!
This is correct. As the importer of the goods, you will be charged UK VAT when the goods enter the UK. Some suppliers meet this cost on their customer’s behalf, particularly where they know that the customer can’t recover VAT. But unless they specifically say in their terms that they will, the default is that the customer pays.
In theory, it’s the same as when you buy goods from a business in the UK – the UK seller would have to charge VAT, which is passed on to HMRC.
The only potential difference with your particular example is that within the UK there is a “margin scheme” which allows second hand dealers in some cases to just calculate VAT on their markups, rather than the full price. This scheme wouldn’t be available to an overseas dealer.
The term “reverse charge” is most commonly used in connection with cross border B2B services, but there are a number of “domestic” reverse charges. Details are in HMRC notice 735: https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-notice-735
The link you’ve given is a very high level description of the flat rate scheme – it’s better explained in section 2.7 of the detailed version: https://www.gov.uk/guidance/flat-rate-scheme-for-small-businesses-vat-notice-733–2#basics-of-the-flat-rate-scheme
Effectively, you can’t use the flat rate scheme to calculate VAT on your income if the related expenditure is subject to the reverse charge.
Residential rents will be exempt from VAT, so won’t count towards the registration limit.
Provided that they don’t opt to tax the land, those sales would also be VAT exempt.
Exports are zero rated, so should be reflected in box 6. See section 3.7 of notice 700/12: https://www.gov.uk/guidance/how-to-fill-in-and-submit-your-vat-return-vat-notice-70012#section3
Supplies to the EU from NI are shown as a separate bullet point on section 3.7 because they’re not technically “exports”, they’re called “dispatched” instead – see sections 2.9-2.10 of the same notice.
I’ve never used Stripe – but if you check their invoices, do they show a UK (GB prefixed) VAT registration number, or a foreign one?
If it’s a GB number, then it’s possible that their services may fall within a VAT exemption (unlikely to be covered by a zero rating). See HMRC VAT Notice 701/49: https://www.gov.uk/government/publications/vat-notice-70149-finance
If the nature of the services aren’t covered by this exemption and Stripe are only established overseas, you’ll need to do the reverse charge.
Q1. This is correct (assuming that they’re not based in the UK). Effectively with a reverse charge, you are accounting for VAT on both sides of the fees transactions. You are paying HMRC the VAT on Amazon’s fee income, and then reclaiming the VAT on your fee expenditure.
Q2. Amazon as an online marketplace are deemed to be making the sale in Ireland – see guidance from the Irish Revenue: https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part10-special-schemes/vat-ecommerce-rules/vat-ecommerce-rules-overview.pdf
I would then consider that the zero rating for exports should apply to your income.
The key is to establish where the “place of supply” is. HMRC’s notice 741A covers this: https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#sec9
From your description, sections 9.3 and 9.4 may apply. If this is the case, the place of supply is the foreign country where the conference is being held. UK VAT wouldn’t be chargeable to either UK or overseas attendees – but you may have some liability for VAT or similar taxes in the foreign country.
My only doubts on this is that your description does appear to include a wider bundle of services than HMRC’s wording – would they all count as “ancillary”? If the service package you’re supplying doesn’t fit within the HMRC definitions in 9.3/9.4, you’re back to the general rule of charging UK VAT to UK-based customers.
I’m assuming that you’ve received your VAT registration certificate from HMRC, but your number is showing as invalid on HMRC’s checking website? If so, there does seem to be an issue with new and amended registrations, as detailed here: https://www.gov.uk/government/publications/check-a-uk-vat-number-service-availability-and-issues/check-a-uk-vat-number-service-availability-and-issues
You don’t mention how you’re losing money from this. If you’ve got the certificate, you’re registered – and can issue VAT invoices and reclaim VAT on your costs (subject to the normal rules). It’s possible that some customers may want to check that your registration is valid, as might any foreign based suppliers. If so, until the system is fixed, I’d suggest sending them a copy of your VAT registration certificate together with a screen shot of the page I’ve given the link to. These will prove that your registration is valid and explain why the checker suggests otherwise.
You can claim it now – in the same way that when you buy new stock now, you’ll reclaim VAT at the time of purchase, rather than waiting until you sell it.
Yes you can, provided that you still have the VAT invoices for those transactions. You can even claim VAT on some pre-registration purchases. Generally:
– services up to six months pre-registration and
– any goods still in stock at the date of registration, that were bought up to four years pre-registration.See: https://www.gov.uk/hmrc-internal-manuals/vat-input-tax/vit32000 – it’s a bit technical as it’s part of a manual that HMRC produce for their own staff.
Remember that the backdating means you’ll also need to declare VAT on income from that date – “income” being the sales prices, rather than what’s left after Amazon, eBay, etc. deduct their fees.
You can reclaim the VAT. This is because the “time of supply” (tax point) is brought forward where either the customer makes payment or the supplier issues a VAT invoice, prior to delivering the goods.
Your advance payment set the tax point, which then required your supplier to declare the VAT on that amount and issue their proper VAT invoice.
The reason that I’d assumed option 1 was because:
- you knew how much the ultimate customer was paying – this would be unusual if there was no contractual relationship between you and them, as the amount would be irrelevant; and
- the terms “retained by them” and “commission” might imply that the amount paid by the ultimate customer is “your” money, just being handled by the company.
If it is option 2 and you’re VAT registered, then whatever income you receive from the company needs to be subject to VAT. They would be able to recover any VAT you charged them. Is it possible that some people who do work for them aren’t VAT registered? If so, if you told/proved to them that you are VAT registered, would they pay you £52+VAT, instead of just the £52?
If the company is a very large firm, I’d expect that there are detailed contracts or terms and conditions documents in place? If so, may be worth asking your accountant or an advisor to read through them and give their view on whether the company is:
- your agent in your supply to the ultimate customer (my option 1); or
- your customer and a principal in the supply to the ultimate customer (my option 2).
The amounts in this example may be small, but the potential for VAT errors could become more significant if you start to do a lot of work through/for them.
As before – I’m assuming that the work isn’t construction-related, as there are different rules for contractors and subcontractors in the construction industry.
You need to establish what the contractual arrangements are. It’s likely to be either:
1. There is a direct contract for the work between you and the ultimate customer, and this other company is acting as your agent in making the arrangements; or
2. There is no direct contact between you and the ultimate customer – instead you are contracted to supply services to this other company, and they are contracted to supply services on to the ultimate customer.From your question, I’ll assume it’s the first of these. If it’s the second one, let me know and I’ll re-work it. I’m also going to assume that you’re not involved in the construction industry, as there are some different rules there. Again, let me know if it is construction-related.
The other company is collecting the £78 on your behalf. The £13 VAT element of this is for you to pay to HMRC on your VAT return, not for the other company to deal with. The £13 (incl VAT) fee deduction that the other company makes is an expense to you, so you’re entitled to reclaim the VAT element of this (£2.17) from HMRC – you’ll need a VAT receipt or receipted VAT invoice from them to support this, in the same way as any other business expense.
If this is the case, the other company should pay you £65.00 – the amount that they’ve collected from the ultimate customer, less their fee. You will need to pay HMRC the £13.00 due on the ultimate customer’s payment, less the £2.17 recoverable on the other company’s fee. That leaves you £54.17, which is the £65.00 from other company, less the £13.00 VAT you pay to HMRC, plus the £2.17 VAT on the fee, that you reclaim from HMRC.
