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Nicola-mod
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Category: Tax
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H, Does a UK company need to be VAT registered and charge

Customer Question

H

Hi Sam,

Does a UK company need to be VAT registered and charge VAT if it only charges service fees to a US company/

I am in discussions with a US accountant on various options of setting up a US company.

One of the options is to do this via a UK Ltd Company – so the UK company owns the US Corporation and charges the US company a quarterly service charge fee. I would then draw either a salary or dividends from the UK company.

I understand from a UK perspective that if the turnover exceeds £83k/yr, the Ltd company will need to be VAT registered and charge VAT, however I do not know if VAT is charged worldwide or only to EU customers/suppliers?

In the scenario above, would I need to charge VAT to my US company? So ultimately this would mean I am giving myself additional 20% tax via VAT if the UK company owns the US company and the fee has additional VAT charges?

Submitted: 2 months ago.
Category: Tax
Expert:  Sam replied 2 months ago.

HI

Thanks for your question and for asking for me

Whether VAT is charged is based on where the services are supplied and as this is a business to which this is supplied, this is where the VAT position is considered.

And as the business is then outside of the EU - then the VAT is outside of the UK scope - so no VAT charged

Thanks

Sam

Customer: replied 2 months ago.

Thank you Sam.

The US company will predominantly sell products to the US but will also later sell internationally to the EU and UK (this will all be conducted under the US Corporation).

So am I right in my understanding that selling internationally would not affect the VAT position in any way because the service is still provided by the US company and ultimately the UK company is billing the US company (ie no VAT)? Is my understanding correct?

Thank you.

Expert:  Sam replied 2 months ago.

Hi

Thanks for your response

You advised you would supply services - and this the advsie given - where do the goods come in?

Goods are different as we have VAT and then consideration of export fees too - so you would need to establish the commodity code to see what charges arise.

See link here

Thankshttps://www.gov.uk/starting-to-import/importing-from-noneu-countries

Sam

Customer: replied 2 months ago.

To explain, I did mention in my question that the UK company would set up a US company.

-The US company would therefore be owned by the UK company).

-The US company would be doing all the trading using US services and suppliers so nothing is sent from the UK and stock is held.

-The UK company would then charge the US company a service fee.

-The US company pays the UK company the fee.

1. The question was about whether there would be a VAT charge applied to the invoice raised by the UK company to the US company.

2. My 2nd clarification question was whether there were any implications if the US company later in time sold products internationally eg to the EU or UK? As the US company is owned by the UK company, I wanted to check if the VAT would still NOT be an issue because ultimately all the trading is undertaken by the US company?

I hope that makes sense?

Expert:  Sam replied 2 months ago.

HI

Thanks for your response

Yes - I am aware of what you advise but the goods is a new aspect which you had not initially mentioned.

You advsie that the UK company would own the US company and that the US company would import goods into the EU - so can I ask why you are creating this arrangement as this seems to be tax evasion both for UK tax and VAT purposes, due to a deliberate separation of profits

Can you advise the reason for this convoluted arrangement if this is not the case

Thanks

Sam

Customer: replied 2 months ago.

It is not for that purpose at all!

I do not appreciate being accused on a public platform of such things when I am actually paying to seek professional advice to ensure everything is set up correctly! Given you do not have the full understanding of the background of everything, I feel you should not have made such an accusation without even asking for the full facts!

The purpose of having a US business is to have a US bank account to enable trading in the US without transaction fees being charged to customers. You cannot receive payments from US customers without some form of fee being charged to them. If I have a US bank account and US business, international customers have a smooth purchase experience without confusing currency exchange fees.

Certainly not for dodgy dealings as you have implied!

Expert:  Sam replied 2 months ago.

HI

I am not making accusations I am advising you how HMRC will view this arrangement on how it SEEMS,

You had not given the full picture with your first post and had suggested intially that this was merely services supplied - then you advsie you are creating a third party position to allow expert of goods by this US company - which IS goiung to evade tax and VAT so IS tax evasion - for whatever reason you may be creating this situation and therefore that is an expert (ex HMRC) opinion which one would assume is what you seek

I also asked for the reason for this arrangement if not what it seemed, but that does not negate how HMRC VAT and Corporation will view this -

I shall opt out as clearly you just want a blinkered reply (to what you need) rather than an honest response looking at the overall position and I am afraid I have integrity on my work and providing a full and complete service, as you will see if you re-read my responses.

I am sorry that you did not want to hear this

Thanks

Sam

Expert:  Nicola-mod replied 2 months ago.
Hello,
It seems the professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new professional to assist you with your question, but sometimes finding the right professional can take a little longer than expected.
I wonder whether you're OK with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Nicola
Customer: replied 2 months ago.

Hi,

Please cancel the question.

Thank you.

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