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in the future: use mysqli or PDO instead in /home/sites/westwaters.co.uk/public_html/framework/lib/sddb.class.php on line 166 Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/sites/westwaters.co.uk/public_html/framework/lib/sddb.class.php on line 166 Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/sites/westwaters.co.uk/public_html/framework/lib/sddb.class.php on line 166 Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/sites/westwaters.co.uk/public_html/framework/lib/sddb.class.php on line 166 Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/sites/westwaters.co.uk/public_html/framework/lib/sddb.class.php on line 166 Deprecated: mysql_connect(): The mysql 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Reclaim VAT on the costs of supplying foreign customers

Where you don’t charge VAT to your customers you can’t usually reclaim any you incur in respect of the costs of making the supply. What are the exceptions to this rule when selling services to foreign customers?

Benefits of not charging VAT

If you charge VAT on the services you supply, you will have to pay this over to HMRC with your return form. But if your client doesn’t pay you on time that will leave you out of pocket. So is there a way to avoid charging VAT in the first place?

International services - the rules

Services you supply in the UK will usually be chargeable to standard rate VAT. But it’s not chargeable on certain services provided to foreign clients, where:

the customer is in business and based in another EU country

the customer, whether in business or not, is based outside the EU.

Tip. If you supply services to a business in the EU, ask for their VAT number (or equivalent). Record this on your invoice to show HMRC if it asks why you haven’t charged VAT.

Claiming input VAT

Tip. The good news is that even if you don’t need to charge VAT to your overseas customer, you can still reclaim the VAT you paid on the costs associated with your work.

Avoiding VAT - EU countries

Not all services escape VAT, even where you’re providing them to a business customer in the EU. HMRC publishes details of all those that do at http://www.hmrc.gov.uk/VAT/managing/international/exports/services.htm . The most important examples are:

consultancy work (but not in connection with UK land and property, e.g. surveying)

services of engineers, lawyers and accountants

hiring of goods, other than for transport

advertising services.

Management or consultancy?

“Management” services are not on the list and so VAT must be charged, but “consultancy” services are and so escape. But how do they differ? Management services will usually involve providing day-to-day support rather than specific advice. Example. If you contracted out your telephone sales to another company, they would be providing you with a management service. But if you asked someone to look at your telephone sales systems and make recommendations on how to improve it, that would be consultancy.

Another test is to ask yourself the following questions, and if you can answer “yes” to both, you can legitimately call your work consultancy:

are you providing your expertise to advise a client?

do you give written or verbal advice?

Avoiding VAT - non-EU countries

The VAT treatment is further relaxed for services supplied to non-EU customers.

Tip. If you provide any of the services shown in HMRC’s list, you don’t have to charge VAT irrespective of whether or not your client is in business.

Example. Jones & Co Accountants of London complete a tax return for a private individual who lives in Australia. They charge a fee of £500. This fee is not subject to VAT.

Please give us a call if you would like further information or advice. 

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We are a proactive firm of accountants who can assist you in all your financial needs in a friendly, efficient and professional manner.

Building partnerships, listening to your needs, and implementing a solid financial strategy is the backbone of our practice. 

Why work with us?

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