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I am a US resident and do some contract work for clients in the UK.

This work done 100% remotely from the US. The work involves carrying out research and analysis (e.g. in Excel)

Technically I am a sub-contractor. I supply services to (and charge) a UK-based company (my client), who in turn supplied the end product to customers.

Can any one tell me if I am required to register and charge for VAT?

Thanks in advance for your time.

user77711
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  • As the two completely opposite answers below illustrate: get some proper tax advice, don't ask this stuff on a freelancer forum. – user3244085 May 10 '17 at 04:13

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Answering my own question, in case anyone has this issue in future.

I sent a query to the UK tax authority (HMRC) who responded as follows:

"As you are providing supplies to a UK business from outside the UK, your client would be liable to account for the VAT using the reverse charge procedure. This is explained in section 5 of VAT Notice 741A: place of supply. Therefore, you do not need to charge or register for VAT, however you may choose to register for VAT in the UK if you wanted to. This is explained in VAT Notice: 700/1 Should I be registered for VAT?"

Basically, there are different requirements depending on whether you are supplying a business or consumer in the UK. If you are supplying a business, you do not have to charge VAT. If you are supplying an end consumer, you would be responsible for charging VAT in some circumstances. Hope this helps.

user77711
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I'm pretty sure you DO have to collect and pay VAT if the sale takes place in the EU.

https://quaderno.io/blog/what-you-must-know-about-vat-if-you-have-customers-in-europe/

All the app stores for example force you to charge VAT / local sale taxes, although I believe they handle the collection and payment for you.

When doing business in a country the general rule is you have to pay tax to that country.

However, there are lots of other reasons why you might not be liable, (earning less than £85k? sale technically takes place in the US?) or the VAT might be 0% you should talk to an accountant

Ewan
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  • Thanks Ewan. I've contacted the UK tax authorities and they tell me I do not need to charge VAT if I am supplying a UK business (please see my answer above). Turns out the rules are different if you are supplying a consumer versus a business. Your link relates to consumers. Thanks for taking the time to answer. – user77711 May 12 '17 at 15:38
  • no prob, thanks for posting your answer! v informative! – Ewan May 12 '17 at 15:40
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You do not need to collect VAT. It is the responsibility of the client in the UK to add on VAT when they sell it to the next level.

Consider this, if you were required, you would then be filling out annual tax forms for the EU (they are still in EU) and then have to figure out how to deduct those paid taxes as expenses on your own US taxes. You are not required to deal with VAT.

Similar if you have a business in Utah and sell a product, without sales tax, to a consumer in North Carolina, you are not responsible to collect tax for an out of state sale. If you did, you would have to register with 50 different states and submit tax filings to each every year whether you made a sale or not to that state. Instead, what happens is the customer in North Carolina (or UK/EU) is responsible for reporting their own purchase and paying the appropriate sales tax, if any.

Entre Preneur
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