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bigduckontax
bigduckontax, Accountant
Category: Tax
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Hi there, I have my own VAT registered limited company

Customer Question

Hi there,
I have my own VAT registered limited company and have two sources of income:
1. Employed as director for Malawian-based company (I am UK based and travel to Malawi < 3 months per year. I do not pay local Malawian taxes and fully committed and oblige to pay taxes). This income is channelled through my limited company and have been paying VAT to date (VAT deducted from salary and not added on as extra)
2. My ltd company has a contract as a service provider with an Israeli-based company. I provide services but responsible to assist various territories in UK, EU and third countries with sales, although I do not get involved with direct sales. As with the first case I have been paying VAT on the consultancy fee (VAT also deducted from salary and not added on as extra)
I pay corporation and personal tax on top of this, has felt strange to be paying VAT to date. Please confirm whether VAT should have been paid on these and, if not, please site the relevant HMRC document or guidelines
Thanks in advance.
Mr Mandis
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Mr Mandis, I'm Keith and happy to help you with your question. I regret to have to tell you that you have been operating VAT incorrectly.
In my opinion the income from a Malawian company channeled through your company is, as far as your company is concerned, an export, a zero rated supply, ie it is subject to VAT, but at a rate of zero percent.
The situation is exactly the same for the Israeli company, again an export and again a zero rated supply.
You can correct small errors in the current VAT account. The level of correction needed will be large and you will have to approach your local VAT office for advice on how to proceed. I am surprised that your accountants did not appraise you of the situation when you set up a couple of years ago.
You will need to issue revised invoices for all the relevant transactions.
I am so sorry to have to rain on your parade. You will have to sit down with a wet towel round your head and the backs of lots of envelopes to calculate the adjustments due to your company.
Customer: replied 1 year ago.

Dear *****,

Many thanks getting back. I appreciate the extra workload involved in correcting this, but for now, concerning documentation, both sets of invoices do not make explicit reference to VAT. Does that mean I can leave them as is and just address this problem with HMRC?

Kr,

Atha

Expert:  bigduckontax replied 1 year ago.
Certainly Atha, I quite understand; you have been stripping out VAT output tax from moneys received and no invoices as such have been issued.
You simply have to approach HMRC to request how you can unscramble the errors and get the overpaid VAT returned as a considerable sum will be involved.
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