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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4716
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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DFL Ltd. (UK based & registered for tax and VAT in the UK)

Customer Question

DFL Ltd. (UK based & registered for tax and VAT in the UK) would buy uniforms, protective clothes, electric tools, welding tools from 4 different companies in Lithuania (EU). (all companies based and tax, VAT registered in Lithuania.)

It will be around €500.000. No VAT on the invoices from Lithuania.

All stuff will be shipped to the UK to DFL Ltd., and after selling those to Germany (EU) to DFL GROUP.( Limited Company, registered for tax and VAT in Germany. Owner is absolutely different from the similar named UK company - but the name similar by chance).

1. Should the DFL Ltd. (UK) put VAT on when it will be sold to Germany?

2. Should the DFL Ltd. (UK) pay tax after this to the UK?

3. Should any of these companies pay tax / VAT at all in Lithuania, Germany or in the UK?

4. If yes, who and what?

5. If not, or not all of them, who should pay any tax or vat and where?

6. Will be the UK based DFL Ltd. being checked more seriously by Taxman or HMRC because the company didn't make any business in the last 2 years, and the first invoice would be now around €500.000?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

My response to various points raised by is as follows:
[Q]
1. Should the DFL Ltd. (UK) put VAT on when it will be sold to Germany?

[A]
If you're sending goods to someone who is genuinely registered for VAT in the destination EU country, you can zero-rate the supply for VAT purposes. There are certain conditions that have to be met. You can only zero-rate these supplies when all these conditions are met:
- the goods are sent out of the UK to somewhere in another EU country
- whoever you're sending them to is genuinely registered for VAT in another EU country
- you get their VAT registration number - including the two letter country code - and show it on your sales invoice-
-you've got paperwork showing that the goods have gone out of the UK - 'evidence of removal'
- you dispatch the goods and get evidence of removal within a set time - which is normally three months

More information on VAT on sales to someone who is VAT registered in another year can be found here
http://www.hmrc.gov.uk/VAT/managing/international/exports/goods.htm#1

[Q]
2. Should the DFL Ltd. (UK) pay tax after this to the UK?

[A]
DFL Ltd (UK) would pay corporation tax on profits chargeable to CT. If there is no profit when you prepare the company's annual accounts then there is no CT payable.

[Q]
3. Should any of these companies pay tax / VAT at all in Lithuania, Germany or in the UK?

[A]
I can only answer question pertaining to UK taxation.
The process of importing goods from within the EU is called acquisitions rather than imports. You pay VAT (acquisition tax) at the same rate as the VAT would be if you had bought the goods in the UK. You reclaim the VAT (acquisition tax) in the same way as you would as if they would have been bought in the UK.
This notional VAT is shown both as output and input resulting in nil effect.

There would be no other tax on purchases.

[Q]
4. If yes, who and what?

[A]
It is covered within 3 above.

[Q]
5. If not, or not all of them, who should pay any tax or vat and where?

[A]
I can only advise on VAT taxation. You may wish to check with authorities in Germany and Lithuania about local taxation implications.

In the UK, you would pay VAT on sales to customers within the UK.
You would pay CT on profits made by the UK company.

[Q]
6. Will be the UK based DFL Ltd. being checked more seriously by Taxman or HMRC because the company didn't make any business in the last 2 years, and the first invoice would be now around €500.000?

 

[A]

If the company has not traded in previous 2 years and you have filed Dormant Company accounts with Companies House for those periods, there is no reason why HMRC should check these accounts more seriously. If on the other hand they have information to suggest otherwise, then it is likely they may check the accounts.

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