From memory you have to raise a VAT liability for services from the EU, but then you just claim it back (next period?). Becomes irrelevant Nov 1st, when you will likely pay 70% tariff as 3rd country instead.
Unless you are a charity with no taxable supplies and you cannot reclaim reverse charge. Which is the pickle I am in. Always thought RC was a book entry only and no cost to organisation.
It’s not just EU supplies either. I have recharges from India and been told I have to calculate reverse charges as the place of supply is where the costs end up not when the activity takes place. If that is not true would appreciate your thoughts as it is going to cost my charity mega bucks
Kimbo,
Unfortunately it sounds like you’re right here.
The reverse charge applies to most B2B services bought in from overseas - not just from EU suppliers.
For most businesses (at a guess - 90%) this is just a book exercise and it goes in and out on the same return, so no net cost, as they can recover all their VAT.
But when you can’t recover any or all of the VAT you incur then this becomes a net cost.
The reason it’s there in the first place is to ensure there is a level playing field, ie if you could buy in the same services from abroad VAT free then you would, but I don’t suppose that’s any consolation to you. But it does mean you are no worse off than if you bought the same things locally and local businesses are protected to a degree from overseas competition.
I should also add that none of this is likely to change post-Brexit either as there is no real distinction between purchases from EU and non-EU suppliers in this context.
Just about to get involved in this myself, husband is currently working in Holland, would be interested to know what directive needs to be added to invoice. Purely labour being supplied. Work for company that supplies EU companies and our invoices state "Intracommunity Supply - Reverse Charge" not sure this would apply for labour?
Yes, that's fine (assuming your husbands customer is an EU business, rather than an individual)
Unlike some EU Member States where they insist you quote the relevant EC Directive and/or national legislation, things are much more relaxed in the UK.
This is what HMRC's published guidance (VAT Information Sheet 10/07) states are acceptable narratives;
Reverse charge supplies:
'Reverse charge supply'.
'This supply is subject to the reverse charge'.
'Subject to reverse charge in the country of receipt'.
'Subject to reverse charge in another member state'.
'This is a UK exempt supply which may be chargeable in the country of receipt'.
'This is a UK exempt supply which may be chargeable in another member state'.
I should also add that none of this is likely to change post-Brexit either as there is no real distinction between purchases from EU and non-EU suppliers in this context.
Do you mean by this that the reverse-charge arrangement is also in place for non-EU countries? (just asking, cos I am not an accountant :-) )
I looked up the text of our reverse-charge declaration on invoices and it is also pretty simple:
The above services are subject to reverse charge according to Section 196 Directive No. 2006/112/EC and Section 9 (1) of the Czech VAT Act.
I should also add that none of this is likely to change post-Brexit either as there is no real distinction between purchases from EU and non-EU suppliers in this context.
Do you mean by this that the reverse-charge arrangement is also in place for non-EU countries? (just asking, cos I am not an accountant :-) )
I looked up the text of our reverse-charge declaration on invoices and it is also pretty simple:
The above services are subject to reverse charge according to Section 196 Directive No. 2006/112/EC and Section 9 (1) of the Czech VAT Act.
Prague, for purchases the reverse charge generally applies across the whole of the EU for any services bought-in from overseas, be these from EU or non-EU suppliers.
It's a common misconception that you only have to apply it to EU purchases - including an aggressive HMRC officer I had to put back in their box on this very point only last week - but it applies to purchases from anywhere.
Its a fundamental part of the EU VAT system for international supplies, but similar concepts are in place in other countries outside the EU that operate a VAT or GST system too.
When it comes to what has to go on sales invoices there is a lot more divergence. In CZ you are quoting the EU and local VAT legislation. In the UK you don't have to do that and HMRC are happy with the more general narrative I copied above.
I should also add that none of this is likely to change post-Brexit either as there is no real distinction between purchases from EU and non-EU suppliers in this context.
Do you mean by this that the reverse-charge arrangement is also in place for non-EU countries? (just asking, cos I am not an accountant :-) )
I looked up the text of our reverse-charge declaration on invoices and it is also pretty simple:
The above services are subject to reverse charge according to Section 196 Directive No. 2006/112/EC and Section 9 (1) of the Czech VAT Act.
I am, for my sins an accountant who is stupid enough to also be a Head of Tax. VAT is not my specialism but I have to deal with it every day.
Reverse charge VAT means you account for that reverse charge VAT in your local jurisdiction (where the service is delivered) no matter whether the service is provided from the EU or a non-EU jurisdiction.
The only way round that is to have the service genuinely provided to a non-EU, non-reverse charge jurisdiction. So if you were buying eg IT services from India where the service was provided to the US, you’d be fine.
Most companies make taxable supplies and can recover their VAT against VAT chargd on your own services (if registered). Notable exceptions being charities and insurance (and other financial services) where supplies are exempt and others where they are zero rated.
Happy to assist anyone who wants a bit more colour on these.
Comments
Unfortunately it sounds like you’re right here.
The reverse charge applies to most B2B services bought in from overseas - not just from EU suppliers.
For most businesses (at a guess - 90%) this is just a book exercise and it goes in and out on the same return, so no net cost, as they can recover all their VAT.
But when you can’t recover any or all of the VAT you incur then this becomes a net cost.
The reason it’s there in the first place is to ensure there is a level playing field, ie if you could buy in the same services from abroad VAT free then you would, but I don’t suppose that’s any consolation to you. But it does mean you are no worse off than if you bought the same things locally and local businesses are protected to a degree from overseas competition.
Hope that helps.
I looked up the text of our reverse-charge declaration on invoices and it is also pretty simple:
It's a common misconception that you only have to apply it to EU purchases - including an aggressive HMRC officer I had to put back in their box on this very point only last week - but it applies to purchases from anywhere.
Its a fundamental part of the EU VAT system for international supplies, but similar concepts are in place in other countries outside the EU that operate a VAT or GST system too.
When it comes to what has to go on sales invoices there is a lot more divergence. In CZ you are quoting the EU and local VAT legislation. In the UK you don't have to do that and HMRC are happy with the more general narrative I copied above.
Reverse charge VAT means you account for that reverse charge VAT in your local jurisdiction (where the service is delivered) no matter whether the service is provided from the EU or a non-EU jurisdiction.
The only way round that is to have the service genuinely provided to a non-EU, non-reverse charge jurisdiction. So if you were buying eg IT services from India where the service was provided to the US, you’d be fine.
Most companies make taxable supplies and can recover their VAT against VAT chargd on your own services (if registered). Notable exceptions being charities and insurance (and other financial services) where supplies are exempt and others where they are zero rated.
Happy to assist anyone who wants a bit more colour on these.