Do I charge VAT?

Q. I’m working for a UK company via an EU (Irish) agency, my accountant says I do need to charge VAT as a UK company providing a service to a UK company regardless of who my contract is with but the agency is insistent that I don’t as they are EU sales and won’t accept the VAT charges. Who is right? I’m in the flat rate scheme to add in an extra complication!

A. Both the Irish agency and your accountant could be right but who is right depends upon the circumstances.

Clearly your services are being provided to a business customer and, although it isn’t clear from your query what services you actually provide, the majority of services provided to business customers are treated under the basic Place of Supply of Services rules: that is the service is deemed to be made where the business customer belongs.

Again, it isn’t clear from your query whether your customer is the Irish agency or the UK company but if your customer is the UK company then your accountant is correct, your services are deemed made in the UK and are chargeable to UK VAT.

However if your customer is the Irish agency then the Irish agency is correct as your services are deemed made in Ireland and therefore no UK VAT is chargeable. Instead, the Irish agency will treat the supply to them under Reverse Charge, but you should obtain their Irish VAT registration number and declare the sales on an EC Sales List.

Sections 7 – 13 of HMRC’s VAT Notice 741A (www.gov.uk/guidance/vat-place-of-supply-of-services-notice) provides further advice on the VAT treatment of services that are not under the basic rule.

You have also mentioned that you are using the Flat Rate Scheme (FRS).

If, under the advice above, the Place of Supply of your services is the UK then they should be included in your FRS turnover when calculating the VAT due to be paid to HMRC.

However, if, under the advice above, the Place of Supply of your services is Ireland then they should be excluded from your FRS turnover when calculating the VAT due to be paid to HMRC.

For more information regarding VAT please see our guides to VAT.

This answer was provided by Qdos Vantage.