VAT on services from abroad?

Are you VAT registered?
This is what is applicable within the EU (I am not sure about the rest of the world, hopefully someone else can enlighten us there :)

If you are VAT registered, you can buy goods/services for your business from within the EU without VAT. You then charge normal UK VAT to your clients when you sell your products/services to them. You need to provide your seller/service provider with your UK VAT no for this to work.

In effect it is the same as result as when you buy from a VAT registered company here in cluding VAT and then claim the VAT back - that is also zero VAT on your purchase. I can only assume that they thought it too complicated if everyone were to claim back VAT over the borders and they just decided to do it as Zero from the start.

If you are not VAT registered, you pay the EU VAT just as you would if you bought something in a shop on holiday. And just as you would if you bought something from a VAT registered company over here. As un-registered for VAT you are the "end-user" in the VAT chain, and you can't claim anything back.

Anna
Moderator, flyingstartups.com

Hi Dan

Advantages are:
you can claim back on purchases (including startup computer gear, and other such bits)
it makes you look bigger
it enables you to buy zero-rated from the EU
sometimes it is essential for international trade
you have system in place for when you grow.

Disadvantages:
It makes your prices higher, because you have to add VAT to everything. This is a problem if you are selling to private people, or small non-VAT registered business customers. If you are selling business to business it is normally not a problem though.

I registered my company for VAT because I was buying stock from Sweden when I set it up. There were no companies over there that were willing to sell to me if I wasn't registered, because in Sweden there are no businesses without the equivalent of a VAT registration, and without a number I was seen as a fraud. With the number however I (my limited company) was immediately given trade prices and up to 45 days credit without any further checks from their side. I just could not believe it!

It was a disadvantage because I had to charge the VAT on - all of my customers at the time were end users. However as the VAT rate in Sweden is 25%, the wins because of the zero rating almost cancelled out the loss on the UK 17.5% - plus there was the trade prices that I would not have got otherwise.

Anna
Moderator, flyingstartups.com

If you are not VAT registered you do not charge VAT on sales, and you can't claim any VAT back on purchases.

All you have to do is keep an eye on turnover so that you don't miss the point at which you have to register. You will have to keep checking when you get near the limit because they do change it from time to time.

Anna
Moderator, flyingstartups.com