VAT on EU services
Discussion
We have someone working in Germany doing some software development.
As I understand it from our accountants - because the place of supply is in Germany, we don't charge VAT when we bill the German company. Which is fine.
But - this means that when we complete our VAT returns, the sales VAT does not equal 17.5% of the total sales figure. Now I always thought that HMRC carry out "sanity checks" on the figures you submit, and that's one of them. If that's the case, we'll be failing that check every quarter.
What I don't get is that - were we supplying a PRODUCT to a German company, we would declare those sales in the "EU" boxes in the VAT return - and if we did that, HMRC could see clearly why the ratio wasn't 17.5%. However we aren't supposed to do that since it's a service we're providing.
Why on earth is it different when a SERVICE is being supplied? I can't see any fundamental difference between supplying a product and supplying a service to a German company, at least in terms of how the VAT should be treated...?
As I understand it from our accountants - because the place of supply is in Germany, we don't charge VAT when we bill the German company. Which is fine.
But - this means that when we complete our VAT returns, the sales VAT does not equal 17.5% of the total sales figure. Now I always thought that HMRC carry out "sanity checks" on the figures you submit, and that's one of them. If that's the case, we'll be failing that check every quarter.
What I don't get is that - were we supplying a PRODUCT to a German company, we would declare those sales in the "EU" boxes in the VAT return - and if we did that, HMRC could see clearly why the ratio wasn't 17.5%. However we aren't supposed to do that since it's a service we're providing.
Why on earth is it different when a SERVICE is being supplied? I can't see any fundamental difference between supplying a product and supplying a service to a German company, at least in terms of how the VAT should be treated...?
Edited by zadumbreion on Thursday 20th November 19:24
There is no "law" saying that the VAT calculated on sales as shown in the Output VAT box on the return has to equate to the value of Sales in the Outputs box. Many businesses have a mmisxture of Standard Rated/Zero Rated/Exempt sales so the situation is not that unusual.
I thought Services provided to customers in EU countries were shown in the "EU" boxes in the same way as "Exports" of goods to other EU countries.
There is also a separatae "EU Sales List" form which you might need to be completing.
I thought Services provided to customers in EU countries were shown in the "EU" boxes in the same way as "Exports" of goods to other EU countries.
There is also a separatae "EU Sales List" form which you might need to be completing.
Interesting.
I called the Employer's helpline and it is as I thought - the supply of a service to another EU country should not be put in the EU boxes on the VAT returns. Depending on the nature of the service you may have to charge VAT on it. The example given was someone operating in Germany providing consultancy relating to land in the UK - for some reason this would need to have VAT charged. In our case, where someone is in Germany providing consultancy / software development, we are not supposed to put those sales in the EU boxes on the VAT return.
I called the Employer's helpline and it is as I thought - the supply of a service to another EU country should not be put in the EU boxes on the VAT returns. Depending on the nature of the service you may have to charge VAT on it. The example given was someone operating in Germany providing consultancy relating to land in the UK - for some reason this would need to have VAT charged. In our case, where someone is in Germany providing consultancy / software development, we are not supposed to put those sales in the EU boxes on the VAT return.
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