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bigduckontax
bigduckontax, Accountant
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You my question is, do I have to pay VAT on research

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Hi my question is, do I have to pay VAT on research services I am providing to a BVI Company. For example I have a contract where I am to provide research to a BVI company and be paid, do I a) charge VAT (Not yet registered) and b) do I pay VAT?
I've been out of work for 3 years, so have got a job providing research to a BVI Company. It's likely the payments would take me over the VAT threshold, do I have to pay VAT on research services I am providing to a BVI Company. For example I have a contract where I am to provide research to a BVI company and be paid, do I a) charge VAT (Not yet registered) and b) do I pay VAT?
Submitted: 7 months ago.
Category: Tax
Expert:  bigduckontax replied 7 months ago.

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

The VAT Turnover Threshold is, as you are probably aware, set at 83K. This threshold is the aggregate of standard, reduced and zero rated supplies made. If the threshold is breached in any one year then registration is necessary. Once registered any input tax suffered by your business can be reclaimed quarterly.

Your supplies to a BVI Company will be exports, a zero rated supply. Although you do charge your customers VAT this is at zero percent assuming that you are registered for the tax.

I do hope that I have been able to shed some light on your situation for you.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3605
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 7 months ago.
Hi Keith, I am registering for VAT currently as I've been told I should as it's likely when I start work I will exceed the VAT threshold (or think I will). If I am charging at ZERO for VAT, do I also pay ZERO rate VAT on those earnings? but on any other earnings within the UK that aren't exports, I charge and pay VAT at the full rate?
Customer: replied 7 months ago.
Does that make sense Keith?
Expert:  bigduckontax replied 7 months ago.

Any earnings within the EU would be standard rated supplies as you surmise unless the reverse charge applies*. You would account for these in your quarterly return and reclaim any input tax suffered. I am slightly confused as to what you mean by 'do i also pay zero rate VAT on those earnings.'

Thank you for your support.

* The reverse charge operates for supplies to other countries within the EU where you have the VAT or equivalent number of your customer. Under the reverse charge you charge VAT at the standard rate, but immediately post it as an input thus effectively making it, as far as you are concerned, zero rated.

Expert:  bigduckontax replied 7 months ago.

Where the reverse charge applies you have to make a periodic EU Sales List Return to HMRC.

Customer: replied 7 months ago.
Sorry Keith, I should have thought before I typed.
I'll give an example, I’m likely to earn just over the VAT Rate for my services to the BVI entity say £100K per annum. As such, say if I earnt 100K a year billed to the BVI entity for services I provide to them. How would the Nil Rate work. Would I nil rate charge VAT on the 100K and this would also mean I do not pay VAT on the 100K? but assuming all other taxes (for which my enquiry doesn’t relate)
In essence I’m trying to get my head round, once I’ve billed and received the monies in due course, the VAT band of Nil would mean there would be higher profit in the company as Nil Rate. I do hope that makes sense, apologies if it doesn’t and thank you for your patience. Appreciated.
Expert:  bigduckontax replied 7 months ago.

The first part of your follow up you have it to a 'T'; to use an old Edwardian expression. You would charge VAT to the customer, but at zero percent so the full 100K wound enter your coffers.

For the second part the profit to the would not be affected. Let us assume that the 100K was a standard rated supply. You would bill 100K plus 20K VAT. Thus you would receive 120K in settlement, 20K of which would have to be rendered to the VATman. Simple, as the mercat in the Tv advert would say.

I am off to bed now as I am unwell. Any further follow up I will reply in the morning, but I think I have covered everything in our exchange.

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