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bigduckontax
bigduckontax, Accountant
Category: Tax
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OK here are the details. As a sole trader I have been

Resolved Question:

OK here are the details. As a sole trader I have been operating an online services business that sells globally. I am selling access to an interactive database of added value information so there is no physical product. My customers are worldwide. My turn over in the past 12 months was approx. pounds £50k. About 20% of this is UK, so no VAT registration, but around 20% is Europe. Q1 - Should I be paying EU VAT? Q2. - If yes, what about retrocactive activity? I can identify 'Europe' as a customer location but I do not have a split of actual country beyond discretely identifying France, Germany, Spain and Italy as my lagests sources.
Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: I am a top rate tax payer and just include my website income net of expenses as additional income which is taxed at 45%. The other 60% of my business that is not Europe/UK is mainly Middle East, Australia, Hong Kong and USA
Submitted: 27 days ago.
Category: Tax
Expert:  bigduckontax replied 27 days ago.

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

Firstly the UK VAT Turnover Threshold is 85K in any one year and is an aggregate of all standard, reduced rated or zero rated supplies. It is not exclusively calculated from UK turnover. Supplies within the EU are, in general, standard rated unless they fall into the reduced, zero or exempt categories. Supplies to countries outside the EU are exports, zero rated. At present you appear to be operating perfectly correctly and need not concern yourself with the palaver of accounting for VAT. Of course, in your present scenario you cannot reclaim input VAT occurred during trading.

I do hope that you have found my reply of assistance.

Customer: replied 26 days ago.
I understand from your reply that the UK VAT threshold applicable to my business is the total of my EU (including UK) sales, which as of now is around 40% x £50k, so well under the threshold.
However, what I am concerned about is the EU rule change in January 2015 which I have recently been reading up on. If you look at this flow chart from HMRC I end up in the bottom right side box which implies I need to register for VAT even although I am way below any threshold. i.e. I directly supply end consumers in the EU with online services and I am not UK VAT registered.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/415931/VAT_MOSS_Flow_chart_FSB_edit_V1_0.pdf
Please review and clarify your response.
thanks,
Iain
Expert:  bigduckontax replied 26 days ago.

So, an EU rule change which will be a dead duck in a few years time! By all means register, your UK sales will not be part of the scheme and you will be thrashing about using the reverse charge scheme within the EU. My only comment is what an unnecessary palaver, just typical of HMRC's approach to VAT, make it so complex that traders will charge it and HMRC can gobble it up!

Customer: replied 26 days ago.
what happens if I do not register and then we leave the EU by 2020? Can anyone come chasing me for a claim for the period Jan2015-until EU exit date?
Expert:  bigduckontax replied 26 days ago.

They could, but this is unlikely.

Customer: replied 26 days ago.
I guess the other possibility is that HMRC adopts this rule in any case and it then continues in effect after Brexit. I think the best thing is that I accrue a contingency for the next couple of years in case it all goes wrong.
Expert:  bigduckontax replied 26 days ago.

I concur with your approach. Just play the daft laddie if asked.

Customer: replied 26 days ago.
just for final clarity, can you confirm that until we exit the EU my VAT threshold is calculated as EU including UK turnover, but after Brexit it will purely be my UK turnover for UK VAT and then the individual EU turnover thresholds for each country (typically around 35k euro). If that is the case I think I will be safe for many years to come.
Expert:  bigduckontax replied 26 days ago.

Of course it is all up in the air at the moment. Currently inter EU sales are standard rated and post exit will presumably be exports, zero rated.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 26 days ago.
ok thanks, ***** ***** we are done.
Expert:  bigduckontax replied 26 days ago.

Delighted to be of help, always remember Brer Fox, 'For he lay low and say nuffin.'

Thank you for your support.