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bigduckontax, Accountant
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My wife has a business that is UK based and receives around

Customer Question

My wife has a business that is UK based and receives around £30K in income per year. Due to this, she is not VAT registered. She recently agreed to change her business model and act as a distributor for a French company. The French company is now refusing to pay her the amount owed (around Euro 5K) inclusive of the VAT tax equivalent in France (TTC) because they say that they cannot claim tax back when paying UK based companies. My questions are:
- Can a business state that it will not pay VAT?
- Is it true that French companies cannot claim tax back from UK sales and purchases?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question
Of course a business can state that it is not VAT registered - as any business with a turnover less than £82,000 does NOT need to register
As for their sales to your wife as distributor - I cannot see waht their problem is - as if they sell the products to your wife - to distribute - then they will charge VAT - (or apply the recerse
Customer: replied 1 year ago.
Just to confirm, do you have experience of French TVA? I know the UK rules about VAT registration but need support in terms of the complications of French companies claiming back tax from the purchase of goods from a UK entity? They are saying that they cannot do this.
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. I can see the French company's problem. They have made a sale to an organisation within the EU and that is a standard rated supply. If they had the buyer's VAT reference, which in this case there isn't one, they could apply the Reverse Charge System where they make simultaneous outputs and inputs thus making the transaction effectively zero rated. Remember that a number of EU countries view the British Turnover Threshold with deep suspicion. In Germany for example you have to charge VAT if you make but one commercial sale. As my colleague told you they will simply have to lump it! It is no skin off their nose, they charge VAT, get paid and merely have to account for it in their books of account. They probably do not appreciate the UK system where organisations operate outside the VAT envelope. I do hope that my reply has shed some light on the position.
Customer: replied 1 year ago.
Thanks Keith.Apologies for my ignorance, but just to make sure that I understand.
1. If we had a VAT number, they could make the transaction zero rated. i.e. they would pay us the full amount if we were VAT registered
2. Since we are not VAT registered, they simply have to lump it - i.e. they have no legal right to not pay us tax?
Expert:  bigduckontax replied 1 year ago.
Well, not quite, you must understand VAT speak. If you had a VAT number then they could use the Reverse Charge which effectively makes the transaction zero rated, but it isn't actually; it's standard rated, but the vendor claims it back as an input as he sells. Confused, you will be!
You are correct; they have in this case, to charge VAT to your wife's business which is quite properly not registered and she has to pay it. They then render it through the usual VAT system. I cannot see their problem save a clear ignorance of VAT on inter country transactions.
Please be so kind as to rate me before you leave the Just Answer site.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3389
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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