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If I set up a UK limited company that sells goods online

Resolved Question:

If I set up a UK limited company that sells goods online internationally to the US (so sales are outside of the EU), would the company need to charge VAT on sales if the turnover exceeds the registration threshold? The goods would not come into the UK as they would be dispatched by international suppliers outside the EU.
Is vat applicable regardless of where goods are sold due to the business being a UK business or is this not the case?
Submitted: 5 months ago.
Category: Tax
Expert:  bigduckontax replied 5 months ago.

Hello, I am Keith, one of the esperts on Just Answer, and pleased to be able to help you with your question.

Your sales to the US would be exports, a zero rated supply, so although subject to VAT the rate is 0%.

The VAT threshold for registration is 83K. If sales at standard rate, reduced rate and zero rate aggregate to this amount in any one year then the company must register for VAT and charge same on its invoices. Of course, all input tax may be reclaimed on a quarterly basis. A solution might be to run two companies.

I am soi sorry to have to rain on your parade.

Customer: replied 5 months ago.

Thank you.

1. If it is zero rated, how does that work if my company registers for VAT but the rate is 0%? So the cost of goods to my US customers has 0% VAT? So what would I be reclaiming?

2. Please advise what you mean about running two companies.

Thank you.

Expert:  bigduckontax replied 5 months ago.

You would be reclaiming any input tax for supplies etc paid out by the company.

If you operated through two companies you could keep sales below the threshold between the companies and thus not have to bother about VAT.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 5 months ago.

So effectively if I only sell to US customers, I would do not need to charge VAT to the US customers and I can then reclaim VAT for supplies I pay for?

How is VAT treated if I then later branch out to sell to customers in:

1. Non EU international countries eg Canada, Australia, New Zealand etc?

2. If I then sell to EU or UK countries?

3. If I end up with worldwide customers, I charge VAT to customers in EU countries only?

Expert:  bigduckontax replied 5 months ago.

Correct (technically VAT is charged but at 0%), assuming that the company is registered for VAT.

1. Same as the US, they are exports.

2. All standard rated supplies, but if for EU sales excluding the UK, if you have the VAT or equivalent number of the customer, then the Reverse Charge system can apply. Under this system you charge VAT at the standard rate, but at the same time make an input tax entry for the same amount thus effectively for your company making the supply zero rated. An EU Sales List must ve rendered periodically to cover all Reverse Charge transactions.

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Category: Tax
Satisfied Customers: 3364
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 5 months ago.
My customers will be retail customers so will not have a VAT number as I will be selling retails items. So for worldwide customers, I just charge VAT to EU/UK customers?To clarify the VAT threshold, the £83k is for all turnover regardless of which country it is to?
Expert:  bigduckontax replied 5 months ago.

Correct, at the standard rate, 20%.

The VAT turnover threshold is for the aggregate of all sales, standard, reduced or zero rated. It is only where exempt supplies, and you do not make these, are involved and these do not count. For example doctors and dentists make exempt supplies for treatments.

Customer: replied 5 months ago.
Thank you.So when I send a receipt to US customers, does the receipt need to show the item price plus VAT at 0%? So it the item is $19.99 it would need to show the VAT at 0% or do I not need to include this?Item XX $19.99
VAT at 0% $ 0.00Total amount $19.99To include VAT at 0% could be confusing for international customers!Finally do I only need to register for VAT once the turnover has reached the £83k threshold? If my company receives payments in US dollars, do I convert this to GBP to reach the £83k threshold rather than $83k?
Expert:  bigduckontax replied 5 months ago.

To be pedantic the invoice should show VAT charged at 0%.

Customer: replied 5 months ago.
for the part about the £83k or $83k? I assume I would convert the USD amount to GBP £83,000 before having to register for VAT?
Expert:  bigduckontax replied 5 months ago.

Yes, you can find the HMRC conversion detail here:

https://www.gov.uk/government/collections/exchange-rates-for-customs-and-vat

Please don't forget my rating.

Expert:  bigduckontax replied 5 months ago.

Thank you for your support.

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