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bigduckontax
bigduckontax, Accountant
Category: Tax
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Tax Question. US resident/company sells to consumers in

Customer Question

Tax Question.
US resident/company sells to consumers in the UK - Internet sales. Has no physical presence in the UK.
Stock is purchased in the UK/EU and not imported (so no import tax or VAT)
I understand the requirement for VAT registration changed in 2012, as that immediate registration was required and no threshold - is this correct?
As the company is resident in the US - what effect does dual taxation treaties have, and is there any further tax due from the US company FROM sales made in the UK/EU?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question. You are essentially correct in your understanding of UK VAT.
Here is the HMRC advice on this matter:
'If you don't live in the UK or your place of business isn't in the UK
From 1 December 2012 the UK VAT registration threshold will no longer apply to you.
Your registration date will be the earliest date that either:
You make any taxable supplies here
You expect to make any taxable supplies here within the next 30 days.
You must register as a Non-Established Taxable Person (NETP). You may also want to appoint a tax representative or agent to keep VAT records and accounts on your behalf - that's up to you'
Thus you must register as a NEIP. I am surprised that as you purchase stock in the UK these purchases are not standard rated for the tax. Any tax paid can be claimed as an input tax against your company's output tax due on sales. Import taxes are not recoverable anyway, they merely add to the price and inflate the cost of sales. VAT on imports are, of course, reclaimable as import taxes.
There is a Double Taxation Treaty between the UK and the USA (and indeed some individual states also) and in such cases any tax bourne is allowed as a tax credit against the other country's tax liabilities. The US company would be outside the scope of the UK Corporation Tax regime following this general HMRC guidance [edited]:
'S 19(1), CTA, 09 charges Corporation Tax on non-resident companies trading in the UK through a permanent establishment (previously branch or agency). Where a company trades in the UK, other than through a permanent establishment there can be no charge to Corporation Tax.'
Presumably the company operates by mail order or something similar and does not maintain a warehouse or similar distribution location within the UK, in which case the 'permanent establishment' rule would kick in.
I do hope I have been able to throw some light on the position.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.