Vat question for a friend
Vat question for a friend
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Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all

VAT related question - He will be providing a business consultancy service to a company in Saudi Arabia for 12 weeks, effectively sub-contracting. All work will be performed in Saudi Arabia. A UK based company (to which He have no ties) will invoice the Saudi company, I will invoice the UK based company in GBP. Do Heneed to charge VAT to the UK based company?

Im no accountant. I’ve said it’s simple and the answer is no. The service is supplied in Saudi.

Anyone in the know. He is vat registered and he operates through a ltd company.

w1bbles

1,365 posts

166 months

Friday 6th July 2018
quotequote all
What you have written is not clear. The UK company supplying services to the Saudi company presumably would not add VAT to its invoice. The relationship between the two UK companies needs more clarification. Can you try again perhaps naming them companies A, B and C. The ‘Heneed’ word is confusing me!

Burwood said:
VAT related question - He will be providing a business consultancy service to a company in Saudi Arabia for 12 weeks, effectively sub-contracting. All work will be performed in Saudi Arabia. A UK based company (to which He have no ties) will invoice the Saudi company, I will invoice the UK based company in GBP. Do Heneed to charge VAT to the UK based company?

Im no accountant. I’ve said it’s simple and the answer is no. The service is supplied in Saudi.

Anyone in the know. He is vat registered and he operates through a ltd company.

Super Slo Mo

5,374 posts

228 months

Friday 6th July 2018
quotequote all
He means ‘we need’ I think. Probably using an iPhone wink.

I’m curious about this one too. Not for related reasons, just out of interest as I’ve had a reasonable amount of dealings with vat but never quite in these exact circumstances.
I’ve done similar though, worked a month abroad somewhere, then invoiced the U.K. client on my return. I charged vat.
Actually, If you are both vat registered it makes no difference to either of you if you charge the vat or not so you may as well just charge it.

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
Sorry, he sent the post with ‘i’ and I edited it.

Company A is a uk consultancy. It has a contract with the Saudi govt supplying forensic financial services.

Company A is hiring my friend on a 12 week basis, rolling. He is here in the UK. He operates through company B, a U.K. registered and vat registered entity. He has nothing to do with company A

The contract states ££ per day inclusive of vat, if any. He thinks no vat. No work is supplied here.

Tia

Eric Mc

125,770 posts

295 months

Friday 6th July 2018
quotequote all
Who is he billing for his services?

From what you are describing above, he is billing a UK based company - not the Saudi customer.

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
If a Saudi company purchased a widget from the U.K. and the U.K. company had proof of export, they wouldn’t charge vat. So I assume that as the supply is outside EU he doesn’t need to charge it. He’s interested because the daily rate is rather ridiculous and the contract states incl if vat if any

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
Eric Mc said:
Who is he billing for his services?

From what you are describing above, he is billing a UK based company - not the Saudi customer.
Yes, he bills the U.K. consultancy. Tia

Sheepshanks

41,227 posts

149 months

Friday 6th July 2018
quotequote all
Burwood said:
He is vat registered and he operates through a ltd company.
You’re saying he’s VAT registered in his own right?

The fee being quoted as inclusive of VAT is odd too.

Eric Mc

125,770 posts

295 months

Friday 6th July 2018
quotequote all
Burwood said:
Eric Mc said:
Who is he billing for his services?

From what you are describing above, he is billing a UK based company - not the Saudi customer.
Yes, he bills the U.K. consultancy. Tia
Sounds like he should charge his customer - which is UK based and VAT registered - VAT. It should not make any difference to either party because his UK customer will be able to reclaim the VAT.



w1bbles

1,365 posts

166 months

Friday 6th July 2018
quotequote all
My amateur reading of this (I have done similar before but not quite the same) is that company B needs to invoice company A with VAT added because company B is providing company A with a service in the UK. Company A claims the VAT back in the UK and has separate arrangements to invoice the Saudi Company with no VAT.

w1bbles

1,365 posts

166 months

Friday 6th July 2018
quotequote all
Eric - beat me to it!

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
Sheepshanks said:
Burwood said:
He is vat registered and he operates through a ltd company.
You’re saying he’s VAT registered in his own right?

The fee being quoted as inclusive of VAT is odd too.
No mate, his company. The incl part of his contract is to do with company A not wanting to get involved in tax. Company A has mentioned they won’t be billing Saudis any vat.

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
w1bbles said:
My amateur reading of this (I have done similar before but not quite the same) is that company B needs to invoice company A with VAT added because company B is providing company A with a service in the UK. Company A claims the VAT back in the UK and has separate arrangements to invoice the Saudi Company with no VAT.
Thanks for the opinion. One thing. Company B provides services in Saudi.

Eric Mc

125,770 posts

295 months

Friday 6th July 2018
quotequote all
Company A (the company your friend's company is billing) is correct in not charging VAT on its invoices to the Saudi customer.

Your friend's company is working for Company A - which is a UK based, UK VAT registered business. Therefore, your friend's company needs to charge VAT on his invoices to HIS customer (Company A).

And, as I said previously, as Company A is a UK, VAT registered business, it can reclaim from HMRC any VAT that is has been charged by your friend's company. In other words, it is of no consequence to Company A that your friend's company is charging them VAT. They can reclaim it in the normal way.

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
Thanks Eric et al. Clear smile

w1bbles

1,365 posts

166 months

Friday 6th July 2018
quotequote all
I know you’ve resolved this now, but just to be clear:

Company B is providing services to company A in the UK. The fact that one of the employees of company B is going overseas to fulfil the obligations of that contract is of no consequence in this case.

It’s always helpful to eliminate the individual in these cases and think about the companies and their contractual relationships.

Burwood said:
Thanks for the opinion. One thing. Company B provides services in Saudi.

Burwood

Original Poster:

18,718 posts

276 months

Friday 6th July 2018
quotequote all
Cheers w1bbles, I thought (wrongly) that the critical point was where the supply took place. He’s very conservative and wants to be operating correctly. Thanks again

w1bbles

1,365 posts

166 months

Friday 6th July 2018
quotequote all
It is - but the 'supply' you are referring to in the post quoted is the supply by company A to the Saudis. The supply from company B to company A is in the UK.

Burwood said:
Cheers w1bbles, I thought (wrongly) that the critical point was where the supply took place. He’s very conservative and wants to be operating correctly. Thanks again

Sheepshanks

41,227 posts

149 months

Friday 6th July 2018
quotequote all
Burwood said:
The contract states ££ per day inclusive of vat, if any. He thinks no vat.
Not that it matters to me, but I still don't get this bit. If company A is resolute that their rate includes VAT, was your friend hoping to keep the gross amount? And if he can't, isn't that going to be quite a big hit?

Eric Mc

125,770 posts

295 months

Friday 6th July 2018
quotequote all
If a person retains an amount that is described as "VAT" on an invoice, he is committing fraud

a) he is overcharging his customer

b) he is falsely retaining VAT he should have paid to HMRC