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Lifer Help: VAT Question

Hi all.

Now I know there's a lot of expertise amongst you. Hopefully someone who understands UK taxes and/or in retail can help answer a question I have.

I have a SAAS product (Software as a Service) aimed at retailers/restuarants etc., which basically means it's a website you log into that provides a service for a monthly fee. My company is Bermuda-based and my question relates to selling to retailers in the UK. If I were to target UK retailers, do I have to charge and pay VAT? How does that work?

Essentially, how does it work when dealing, over the internet, with services to UK customers from outside the UK/EU?

Thanks in advance.

Comments

  • This is a "Politics of Tax" thread question... ;-)

    No, if you're not based in the UK then you don't need to charge VAT. You would need to comply with tax laws in Bermuda, which might include a sales tax like VAT (which UK customers would not be able to claim back)

    I'm speaking from experience of "doing" rather than tax expertise. Just based on what I've seen in both directions (selling and buying). Businesses don't pay VAT anyway - ordinary people do.
  • I'll give you side advice based on business, rather than on tax.

    When I ran a SaaS business, based outside Europe, aimed at UK SMEs, many were sceptical about a business not charging VAT. In the same way that a builder "doing work for cash" might give clients pause for thought.

    Dealing with a VAT registered company often gives clients an additional level of confidence, even if it's misplaced.

    If there is no advantage in not being VAT registered, then it makes sense to be registered. And, of course, you'll then be able to offset costs.

    Good luck in your venture!
  • In a word, no.

    The uk retailer would account for vat on the service received from your company by applying the reverse charge i.e. It would charge itself UK VAT on your fees.
  • Boom's right. Which is not surprising, as he normally charges £400 sheets an hour for that sort of advice.

    Where should he send the invoice Lookie? (PS. It would be VAT free)
  • Was waiting for you to turn up!
  • Chizz said:

    I'll give you side advice based on business, rather than on tax.

    When I ran a SaaS business, based outside Europe, aimed at UK SMEs, many were sceptical about a business not charging VAT. In the same way that a builder "doing work for cash" might give clients pause for thought.

    Dealing with a VAT registered company often gives clients an additional level of confidence, even if it's misplaced.

    If there is no advantage in not being VAT registered, then it makes sense to be registered. And, of course, you'll then be able to offset costs.

    Good luck in your venture!

    If it's an overseas business with no UK establishment and dealing only with business customers he probably wouldn't be able to register for VAT here even if he wanted to.
  • IA said:

    Businesses don't pay VAT anyway - ordinary people do.

    That's not strictly true. Plenty of business suffer VAT as a net cost. Banks for starters - not that anyone bothers to mention that as it doesn't fit in with the stereotype.
  • As Chizz says, not being VAT registered is a signal that you might be really small-time (less than about £70k revenue). Given that you're selling to businesses and all of your customers and competitors will be VAT registered, there is no competitive advantage in not being VAT registered. No self-respecting business owner should think that you're cheaper just because you don't charge VAT - they don't pay the VAT anyway! If Bermuda has any sales taxes (no matter how small), then you might actually be more expensive. Also, if you incur any expenses in targeting UK customers (eg hotels, conferences), you can claim the VAT back, so it can work out as more efficient.

    I think the company needs to be based in the UK to register for VAT, so that might add extra complications, legal fees, separate entities etc.
  • Overseas companies can still recover UK VAT they incur.
  • Sorry, Off_it. I left out VAT exempt companies for no particular reason.
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  • Boom said:

    Was waiting for you to turn up!

    You're not still waiting for me in the Bishops Finger from last night are you mate?
  • Off_it said:

    IA said:

    Businesses don't pay VAT anyway - ordinary people do.

    That's not strictly true. Plenty of business suffer VAT as a net cost. Banks for starters - not that anyone bothers to mention that as it doesn't fit in with the stereotype.
    And charities.
  • Off_it said:

    Chizz said:

    I'll give you side advice based on business, rather than on tax.

    When I ran a SaaS business, based outside Europe, aimed at UK SMEs, many were sceptical about a business not charging VAT. In the same way that a builder "doing work for cash" might give clients pause for thought.

    Dealing with a VAT registered company often gives clients an additional level of confidence, even if it's misplaced.

    If there is no advantage in not being VAT registered, then it makes sense to be registered. And, of course, you'll then be able to offset costs.

    Good luck in your venture!

    If it's an overseas business with no UK establishment and dealing only with business customers he probably wouldn't be able to register for VAT here even if he wanted to.
    My suggestion was on the basis of all other things being equal. So, if there is no tax reason preventing someone from being registered, in my experience it's better to be.
  • Thanks everyone for your insights. All very helpful.
  • VAT is an EU regulated tax. It only applies if you are VAT registered and a Bermuda based company can't be registered for VAT.

    VAT is basically a tax collection service on behalf of EU governments for goods sold by EU business to EU purchasers.

    We all have a net VAT bill because it's included in our purchases and unlike a business we cant offset against the VAT included in sales.

    If a bank has a net VAT bill it's only because it buys in more services which include VAT than its vatable supplies because we don't pay VAT on bank charges and many financial services.

  • You're big men, but you're in bad shape. With me it's a full time job. Now behave yourselves.
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