I hope that I will be landing a job in the next month to act as the sales representative for a small (35 people) Norwegian company. They want to run me as a consultant as opposed to an employee and I would invoice them a fixed amount each month as a basic salary plus a variable amount of commission and expenses. I expect the amounts to exceed the VAT threshold and, on calling the VAT helpline today, they informed me that even though I was invoicing a Norwegian company, I would still need to add VAT to my monthly invoices. This is fine by me, in fact I prefer it, but the one thing that I am really worried about is whether the Norwegians will be able to reclaim the VAT on my invoices. If they can't then this will inflate my costs to them by 17.5% and so realistically I will have to drop my "take home pay" by the appropriate amount to keep within their budget. The VAT helpline couldn't help me with this last issue as to whether the Norwegians will be able to reclaim the VAT on my invoices. Can anyone here shed any light on this?
Thanks for taking the time to respond. The Norwegian company is definitely registered for VAT in Norway. I don't believe that they are registered for VAT in the UK.
Thanks Peter. Let me just check that I understand your answer correctly since, if I do understand you correctly, this differs from what the VAT helpline told me (although in fairness we didn't discuss whether the Norwegian company was registered for VAT in Norway).
The Norwegian company is registered for VAT in Norway so if we assume that I invoice them 5,000 a month then on my monthly invoices to them I would (a) quote their Norwegian VAT number on the invoice and (b) invoice them 5,000 for 1 months consultancy + 0% VAT = total invoice value of 5,000.
Have I understood your answer correctly? If so then, since all my invoices would be zero rated, do I need to register for VAT at all?
I believe the following is accurate (altho' IANAA!) :-
There are two types of supplies which have no VAT :- (a) Zero-rated and (b) Exempt. Zero-rated supplies count as "taxable supplies", Exempt supplies do
*not* count as "taxable supplies". You need to register if your "taxable supplies" (including both standard and zero-rated, but not exempt) exceed the threshold.
Thus, the question comes down to whether the supplies are zero-rated or exempt; If zero-rated (as you suggest) then *yes* you will need to register.
This is a difficult area because so much information is needed before an answer can be given. You haven't said whether the Norwegian company is supplying goods or services, nor whether, if they are goods, they hold a stock of them in the UK or if the purchaser would act as the importer. The rules would also be different if you acted as the importer for the Norwegian company. The rules will also differ depending on whether you are acting as an undisclosed intermediary or a disclosed intermediary, i.e. whether the customer knows they are buying from the Norwegian company or do they think they are buying from you.
Lets take a quick look at the VAT place of supply rules for intermediaries. The place of supply for the services of making arrangements for the supply by or to another person of any goods or services is the same place where the supply being arranged is deemed to take place. This means that if the goods are in UK when the supply is arranged, the supply will take place in the UK, so the intermediaries services will be liable to UK VAT. If the goods are in Norway when the supply is arranged, the supply will be outside the UK, so the intermediaries services will be outside the scope of UK VAT.
If the Norwegian company is making supplies in the UK, and your commission will be enough to register for VAT, they will need to be registered for VAT in the UK. This removes any difficulty concerning whether they can recover the VAT you may have to charge them. In general terms though, as the Norwegian company would appear to be making supplies in the UK, they wouldn't be entitled to recover the VAT on your charges without being UK VAT registered. If the Norwegian company doesn't register at the right time it would be liable to belated notification penalties that rise to 15% of the tax not declared from when they should have registered to to the date they did register.
There's a lot of information needed before this question can be answered with anything like a reasonable chance of getting it right. I've only scratched the surface. If you want to get an answer to this question, you need to seek advice from a VAT specialist. What you could do in the interim is to flag this as a potential difficulty for the Norwegians to consider.
Is Norway not in the EEA? Would that not be equivalent, for VAT purposes, to being in the EU?
That technicality apart, what's with the zero-rating?
I take it we are talking about the OP providing services to his emplo^H^H^H^H^Hclient company which would ordinarily be VATtable at standard rate, if everything were to take place within the UK. Is zero-rating the usual expedient mechanism, in cross-border invoicing, for avoiding the need for VAT cash to flow between HMCE and their foreign counterparts? If not, why zero-rate a service which would normally not be zero-rated?
No. It's not on the EC Sales List at least. I don't know what's going to happen to these form when there's the enlargement on 1 May 2004. I wonder whether there's a delay in setting up VAT in the new entrants?
I would think it has something to do with that. Maybe that's why they have the EC Sales Lists forms.
Having to mess about with Children's Tax Credits parts of the tax return so often maybe it's just forms for the sake of forms!
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