This is a guest post from FTI Global VAT Compliance.
While VAT is something that every business has to deal with, along with the increasing list of rules and regulations, there is no denying that it comes as a huge challenge to the vast majority of us.
At FTI Global VAT Compliance, we have compiled a list of best practices, designed to help you effectively manage the common challenges of dealing with VAT, and ultimately keep you on the right track.
1. Know what you are selling and to whom
There are different VAT rules for goods and services, and these may impact your need to be VAT-registered outside of your home country. The way of charging VAT also depends on whether your customer is a business or an individual person.
If you are selling goods, then VAT is due based on where the goods are when they are allocated to the customer’s order. There are additional rules if you are selling to private customers in the EU from the UK, which means that you might have to charge VAT in the country of the recipient.
Therefore, it's important that you know the rules and get your terms and conditions right, so that you don’t accumulate unnecessary VAT liabilities and penalties.
Selling services is also subject to VAT domestically, to both business and private customers. In the EU you can normally offer “zero rate” services to business customers.
If you are selling services electronically to private customers in the EU, then VAT is due in the recipient’s country, regardless of where you, the vendor, are established.
The EU has special accounting schemes to simplify VAT accounting for businesses selling electronic services into many EU countries. Where possible, it is important to make use of these.
2. Know your turnover in each country
If you are a business established in the UK, you only have to register for VAT if your annual turnover is over £83,000. You can, however, register voluntarily if your business turnover is below £83,000 and you want to claim back VAT on costs.
That said, you must pay HMRC the net VAT you owe from the date they register you.
It is also worth noting that in most EU countries, VAT registration thresholds are very low compared to those in the UK.
If you are a company based outside of the UK, selling goods or services to UK customers, then any turnover, however small, requires a VAT registration – there is no limit. Many businesses tend to forget this.
You should also be aware that certain types of sales in the EU may cause you to need a VAT registration there straight away.
3. Dealing with compliance
It is very important to do your compliance, which requires registering for VAT on time and paying VAT where necessary.
This may also be beneficial for both your customers and your business, as it means there are likely to be fewer VAT-related customer queries, disputes and returned products.
In addition, VAT registration further allows your business to claim back VAT paid on goods and services bought for your business in the UK or another country in the EU.
Do remember that it does not have to cost a fortune to get your compliance done. In fact, the cost of compliance is decreasing, and it is far better to stay on top of it.
4. What does it cost
Our standard charges are £250 for a VAT return and £200 for other filings, such as European Sales Lists and Intrastats. For Amazon sellers, we apply even more favourable fees for VAT filings, beginning from EUR 50, depending on your sales volume.
If necessary, we will act as your representative in other EU countries, and we will also provide advice where you need it for competitive fee levels.
5. Make sure you get your money back
Don’t forget that VAT can also be claimed back when you are in business, and to do this you will need to keep both your invoices and records in good order. This is something that we can also help you to manage.
At FTI Global VAT Compliance, we have a team in London, as well as an office in The Hague in The Netherlands, handling European VAT compliance matters. Should you require our assistance, or have any questions, please do get in contact with us.