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bigduckontax, Accountant
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Do online classified website businesses (e.g. Gumtree, Craigslist,

Customer Question

Do online classified website businesses (e.g. Gumtree, Craigslist, etc.) that are registered in the UK need to charge UK VAT to UK customers for paid listings (e.g. featured on homepage, highlighted listing, etc.)? How is VAT handled for EU customers outside the UK?

What are the VAT collection requirements in those scenarios if the company is instead registered in the Channel Islands (Guernsey or Jersey)?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.

Hello, I'm Keith and happy to help you with your question.

 

The Channel Islands (CI) are not part of the EU, nor do the States of Jersey or Guernsey have VAT thus companies registered in the CI would not have VAT on their invoices for goods and services. As far as UK traders are concerned goods exported to the CI ate zero rated supplies. Services a trifle more complicated, see below:

 

'VAT on services UK VAT may need to be charged on services performed in the Islands or to clients based in the Islands, depending on the nature of the service supplied. This is a complex area, but broadly, assuming the supplier belongs in the UK and the customer belongs in Jersey, UK VAT will need to be charged on most services unless one of the following exceptions applies:

 

UK VAT does not need to be charged on most services relating to land or property situated in Jersey. This includes estate agency, conveyancing, architects, surveying, construction, property maintenance, hotel accommodation, defined exhibition stands, and property management services.

 

UK VAT does not need to be charged on most services related to a live event or physical activity carried out in Jersey. This includes cultural, artistic, sporting, scientific, educational, training, entertainment, exhibition and valuation services.

 

UK VAT does not need to be charged on passenger transport carried out in Jersey.

 

UK VAT does not need to be charged on most ‘intellectual’ or ‘intangible’ services supplied to a customer who belongs in Jersey. This includes copyright, royalties, licences, advertising, consultants, engineers, lawyers, accountants, banking and insurance. If the service relates to land or property situated in the UK VAT still needs to be charged.

There are special rules for hired goods (section 13 of VAT Notice 741) and telecommunications (section 14 of VAT Notice 741). With all these services, it is important to look at the precise nature of the underlying service being provided. A business cannot turn one type of service into another simply by changing the description on the invoice.'

Regarding online classified website businesses they must apply VAT applicable to the State in which they are registered. A classic example ie eBay.co.uk, operating from Luxembourg, who charge Luxembourg VAT (15%) on all invoices etc.

I do hope that helps throw some light on your question.

Customer: replied 3 years ago.

Thank you very much for your detailed response.


 


In your last paragraph, you make a comparison to eBay, which is an online retail store facilitating the transaction of tangible goods. People actually sell things on the site and eBay is actually earning a commission on the sale. My website will be more like Craigslist where people can post a classified ad or directory listing for free with the option to enhance their listing with paid features (e.g. bold the text, highlight the background of the ad, feature the ad on the homepage). No physical or digital/downloadable products are being sold, no commission is being earned, and the listing itself is intangible. Does that change anything?


 


Also, if I register the business in Jersey, the focus would be on advertising/marketing to clients outside of Jersey - notably the UK, Ireland, Germany, etc.. If someone from any of those countries pays for premium listing features, do I need to collect VAT based on where the customer is from (e.g. if they're from Germany, I collect whatever the German VAT rate is and send what's collected to the German government).

Expert:  bigduckontax replied 3 years ago.
Ig your company operates as a Jersey based company there is no VAT to be included in your invoices for any goods or services irrespective of which country into which you are selling. Thus there is no VAT interaction with any EU state's VAT system.

I hope you have calculated the cost of running an offshore enterprise in the CI. It is big business there and with a requirement for local directors, registered offices, audit etc it doesn't come cheap! For the likes of Starbucks, Vodafone and Amazon it's peanuts in cost terms, but maybe not so for your operations.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

By the by, have you considered Gibraltar, another favourite tax haven these days!

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