Do you guys charge VAT to US customers? I received a call from the C&E technical department telling me that VAT would have to be charged by the supplier.

This sounds absolutely silly since an added 17.5% is enough to make sure you don't receive any foreign custom.

We currently pay our VAT bill on all our sales just because its simple, although we are looking to split off US sales soon.

Well we had the same problem in our web design company and the accountant told us that we didnt have to charge VAT to foreign customers and likewise we couldnt claim back VAT from purchases abroad.

"foreign customers" does that mean VAT only applies to UK customers? What about EU countries etc.. ?

I think we will have to grab our accountant and have a go at fixing ours soon too - we pay a LOT of VAT :(

I think the only way around it is to incorporate as an offshore or US company.

As far as I know, EU firms can be exempted from VAT if they supply their European VAT number. You then email/phone customs to get them to verify that its a valid VAT number and then you don't have to charge them VAT.

I think the whole system is rediculously bloated and designed to scam as much money as possible out of honest people... and then they have the b***z to wonder why people avoid paying it. In the US the rules seem to be far more simpler and easier to work with (from a business perspective).

With VAT customs say that web hosting is a service so VAT has to be charged at the place of supply. So if your servers are in the UK and you are supplying the service there then you need to charge VAT to all customers. It is only products which you don't need to charge VAT if exporting to EU or other countries. (Don't quote me on this though)

More info can be found here if you do some digging:

http://www.hmce.gov.uk/forms/notices/700conts.htm

I've emailed C&E about this very subject before and got a nice letter back explaining it all to me.
Web hosting is counted as a telecomunications service. Because of this the place of supply is where ever the customer is located. This means you only charge VAT to customers within the EU - no where else.
You can also reclaim VAT from any purchases made by the business from companies within the EU.

Thanks soulfish, looks like we are gonna be saving a few k's a year :)

Soulfish,

Thanks, I just phoned them again to verify and they said its correct. No VAT to charge for webhosting outside of the UK and EU.

The lady told me to put down VAT (0.00%) on my invoices and write 'Zero rated under Paragraph 7a of Schedule 5'

She also told me to look at Chapter 12, Paragraph 12.9, Diagram 4 (not sure of what though :confused: )

-Emrul

Originally posted by UH-Matt

"foreign customers" does that mean VAT only applies to UK customers? What about EU countries etc.. ?

I think we will have to grab our accountant and have a go at fixing ours soon too - we pay a LOT of VAT :(
Maybe you should change your accountant if he doesn't know that you don't have to charge VAT outside the EU. :D

Originally posted by UH-Matt
Thanks soulfish, looks like we are gonna be saving a few k's a year :)

I`m confused how will it save you money ? Vat is not an expense to you it is merely collected from clients and passed on .
It will save some of your clients money.

I`m confused how will it save you money ? Vat is not an expense to you it is merely collected from clients and passed on .
It will save some of your clients money.


If we want to compete with US companies then we have to pay for it.

Originally posted by easily

I`m confused how will it save you money ? Vat is not an expense to you it is merely collected from clients and passed on. It will save some of your clients money.
If you collect VAT from outside of the EU you don't have to repay it to C & E! So the unpaid VAT becomes a saving or additional profit for the company... ;)

Above is correct, you only charge VAT to the EU member countries.

Originally posted by tandem
If you collect VAT from outside of the EU you don't have to repay it to C & E! So the unpaid VAT becomes a saving or additional profit for the company... ;)

Yes i understand that my point is , if you do not collect vat from countries that do not need to pay vat , then you save nothing.
Unless you charge non eu countries vat in which case you are not charging them vat you are just charging them 17.5% more for your service.
Non of this is a problem for us as we do not sell services outside the eu

Originally posted by easily

Yes i understand that my point is , if you do not collect vat from countries that do not need to pay vat , then you save nothing.
Unless you charge non eu countries vat in which case you are not charging them vat you are just charging them 17.5% more for your service.
Non of this is a problem for us as we do not sell services outside the eu
Your angle is entirely correct. But I think your confusion about "saving" started when UH-Matt made this statement (quoted from your own post):

Thanks soulfish, looks like we are gonna be saving a few k's a year.
In another post before that one that he said:

We currently pay our VAT bill on all our sales just because its simple...
:D