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International VAT Obligations

25/01/2018 20:18:44
I am registered as a sole trader based in the UK with a taxable turnover beneath our tax threshold, and have two sources of income:

1) Clients, currently all overseas (in the United States), who pay me for my services, and whose payment secures these services
2) Patronage / sponsorship, worldwide

Concerning 2) Patronage / sponsorship, VAT Notice 701/41 suggests that donations or gifts I receive (from UK-based sponsors), "provided they are freely given and secure nothing in return for the donor [...] are outside the scope of VAT" (section 2.2). I can confirm that any sponsorship I receive will be freely given and secure nothing in return.

For sponsors outside the UK, however, section 3.3 merely says "if you make supplies of advertising services and publicity to overseas sponsors, your services may be outside the scope of UK VAT". I can confirm that I do not make supplies of advertising services and publicity to overseas sponsors.

Could I possibly get some confirmation that this is the only condition pertaining to overseas sponsors and, since I do not satisfy the condition, any sponsorship I receive from anywhere in the world is outside the scope of VAT, as per section 2.2?

To give some more context, the means by which I plan to allow people to sponsor me is via buttons on my website, each with a set pledge amount that a sponsor may send monthly or yearly. It is in these buttons that I would be able to include VAT should I need to charge it. The webpage will not contain any promises of anything in return for pledges. Is there enough information here to confirm whether or not I must collect VAT from sponsors?


Concerning 1) Income from clients, I wonder if VAT Notice 701/30: education and vocational training may apply. My current clients all provide educational services for no charge - like me, their services may be funded by sponsors - about which section 1.2 says:

This is not ‘in business’ for VAT purposes (see section 3) and:

* the education provided is outside the scope of VAT
* any closely related goods or services provided, at or below cost, are outside the scope of VAT; and
* the sales of other goods or services are taxed in the normal way


Does this apply to overseas clients or only UK ones? In other words, does this notice confirm that no VAT should be collected by either me or my clients, wherever they are in the world, and that I needn't even go on to consult VAT Notice 741A: place of supply of services to determine any VAT obligations?

If it doesn't apply to overseas clients, could I basically work on the assumption that:

* UK-based clients would not need to be charged VAT
* EU-based clients would need to be charged VAT
* Overseas clients outside the EU often require UK businesses to be a limited company, but may be consulted to determine their local tax law (as in the case of my US-based clients, they don't need me to charge VAT)
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Re:International VAT Obligations

30/01/2018 10:40:52
Hi Miblo

Thank you for your enquiry.

1) Your first consideration is to establish what country your services are deemed to be supplied in. To help you establish this I would refer you to Public Notice 741A Place of Supply of Services. https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services Section 6 gives information on the general rules for ‘Business to Consumer’ (B2C) and ‘Business to Business’ (B2B) supplies. If you conclude your services are supplied in the UK (e.g. B2B and customer belongs in the UK) you would only at that point need to establish the VAT liability of the service you are providing (services supplied outside the UK are outside the scope of UK VAT). From the information contained in your enquiry you have only detailed the educational service your customer performs therefore the VAT exemptions in Public Notice 701/30 would only apply if you also provide the same type of service.
2) Sponsorship received from sources outside the UK are firstly subject to the same Place of Supply rules I detailed in 1) above. If at that point you establish the supply is made outside the UK the liability is outside the scope of UK VAT. It is only if you establish the place of supply is the UK that you need to look into the UK VAT liability, as detailed in Public Notice 701/41.
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Re:International VAT Obligations

01/02/2018 21:28:24
Thanks for getting back to us, HMRC ADMIN 18.

1) According to VAT Notice 741A, I reckon my services fall under 12.2 Services treated as supplies "services of consultants, engineers, consultancy bureaux, lawyers, accountants, and other similar services - data processing and provision of information, other than any services relating to land". So they are outside the scope of UK VAT.

I appreciate that you (as in the team of HMRC ADMINs) only need to deal specifically with UK law, but do you happen to know if the assumptions mentioned - and here elaborated - in my original post are correct?

* UK-based clients would not need to be charged VAT, because my taxable turnover is below our tax threshold
* EU-based clients would need to be charged VAT, necessitating me to register with HMRC as an organisation and for the VAT MOSS scheme
* Overseas clients outside the EU often require UK businesses to be a limited company, but may be consulted to determine their local tax law (as in the case of my US-based clients, they don't need me to charge VAT), for which I may not necessarily need to register with HMRC as an organisation but would need to register with any overseas tax authorities that require me to charge VAT

2) VAT Notice 741A, introduction says:

You should read this notice if you:
* make supplies of services to customers outside the UK
* [...]
* [...]


VAT Notice 700: the VAT guide, section 4.5 Supplies of services says:

You supply services if you do something, other than supplying goods, for a consideration. A consideration is any form of payment in money or in kind, including anything which is itself a supply

I'm saying that I do not supply any services (or goods, and definitely not "supplies of advertising services and publicity to overseas sponsors", VAT Notice 701/41, section 3.3) in return for sponsorship, in the sense that donations or gifts by way of sponsorship "are freely given and secure nothing in return for the donor" (VAT Notice 701/41, section 2.2).

If HMRC agrees with me that this is the case, VAT Notice 741A, introduction itself is telling me I shouldn't read it, I suppose because I am not supplying any service (to sponsors) of which I'd need to determine the place.

Having gone through this learning process more thoroughly, I feel that, as long as I don't offer any "rewards" etc. in return for sponsorship, then I shouldn't collect VAT from any sponsors wherever they are in the world. So, unless you say otherwise, this question around sponsorship is resolved.