VAT on EU/non-EU goods & services
No UK business wants to pay VAT on goods or services which is not recoverable. Therefore, it is very important to make sure that a supplier based in another EU/non-EU country does not incorrectly charge their local VAT, as this might be irrecoverable and become a cost to the UK buyer.
We have explained a few issues related to international purchases below:
Goods – EU Goods
If the UK business provides their UK VAT registration number to the EU supplier and the goods will be coming into the UK, then the supplier should zero-rate the sale. As the goods are coming from within the EU, there will be no Customs duty to pay because of the Single Market.
However, UK businesses will be required to declare the VAT as acquisition tax. The rate of VAT on the goods will be the same as the goods that were bought in the UK. The VAT declared under acquisition tax will be recoverable if the business is fully taxable, otherwise it will be recovered as per the partial exemption percentage.
Every UK business will also need to register for Intrastat if the business buys goods from EU suppliers and their total purchases in a calendar year exceeds £1.5m. It is a statutory requirement to prepare and submit an intrastat return every month to summarise acquisition of goods from EU suppliers based outside the UK.
The VAT treatment of the goods coming from outside the EU is different from the goods coming from the EU.
The goods will be declared for Customs purposes when they arrive into the UK. Customs duty will usually be charged on the net value of the goods – and then VAT is charged on the duty inclusive figure. The rate of VAT on the goods will be same as the goods that were bought in the UK.
The UK business can import the goods as importer or use an import agent. Using an agent might help with the custom formalities. The VAT paid on imported goods will be claimed as input tax on their next VAT return. This claim must be supported by a C79 certificate, which is the only evidence acceptable to HMRC.
Services – EU and non-EU services
The VAT treatment for the services received from EU and non-EU countries is the same. This is known as the general B2B (business to business) supply and therefore the VAT will be payable in the country where the customer is based. The UK buyer will need to deal with the VAT on their UK VAT return under the Reverse charge mechanism.
For more advice, please contact our VAT team by filling in the form below: