Commentary

V7.271A Input tax issues for a business making all supplies outside the UK

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.271A Input tax issues for a business making all supplies outside the UK

Part V7 Tax planning | Commentary

V7.271A Input tax issues for a business making all supplies outside the UK

The main general principle relating to input tax is that a business based in the UK is able to reclaim input tax on UK costs relevant to an activity where the place of supply is outside the UK, as long as the activity in question would be taxable if it were supplied in the UK. This important point is highlighted by Example 14.

Example 15

John is the sole trader of his own accountancy practice in the UK earning £50,000 per annum. His only cost is that he uses the services of a VAT registered subcontractor in the UK to carry out a lot of the accountancy work. John's clients are all business customers based in France. What can John do to improve his VAT position?

The situation is as follows:

  1.  

    •     The place of supply for accountancy services to EU business customers is where the customer is located, ie France. So John does not charge UK VAT on the value of his services. The French customers will deal with the VAT on their own returns using the reverse charge.

  2.  

    •     John is allowed to register for VAT in the UK (even though the place of supply of his services is France and he has no UK sales) and reclaim input tax on all of his UK expenses (subject to normal rules), including the fees of the subcontractor he uses to prepare accounts. His VAT registration in the UK will

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