If you’re a UK removals business providing services to individuals in the EU and other overseas countries then you need to understand how to apply value added tax rules for this work. Different countries have different rates so first you must decipher which location the tax is applicable in and then you may need to register for VAT in that territory.
Whilst VAT can be very complex at times, by applying the following rules you'll be well placed to calculate your liability accurately. Just remember that this blog has been written for UK removers only and doesn’t apply to businesses registered in other locations, regardless of whether you supply these services in the UK or not.
They key point you need to understand is the place of supply of services when it comes to removals. This means the location where the transport begins, irrespective of where the supplier (you) or the recipient (your customer) belongs.
If for example you transport goods for a customer from Belgium to Germany then for the purposes of VAT the supply takes place in Belgium where the transportation commences. Consequently you may have to register for and charge VAT in Belgium if you haven’t done so already.
If the place of supply is outside the UK then the rule is that it's outside the scope of UK VAT. If the place of supply commences in Britain then UK VAT is applicable. It’s as simple as that.
The only way UK VAT factors into any of this is if we take the previous example of transporting goods for a customer from Belgium to Germany and you hire the vehicle in question in the UK. You would then incur VAT as part of the hire price for the vehicle. For you as the purchaser that’s known as input VAT.
The good news is you would be able to recover that input VAT as it's incurred in association with the removal service. So, you will be able to deduct the amount of VAT paid for the vehicle from your next liability due to HMRC.
The above examples are all well and good but what about where one of the territories is a Non-EC state? Well, there are two ways that could happen. You could send goods from France to Austria via Switzerland which would mean the service was transitioning a Non-EC state.
In this case the transaction is treated as an intra-EC transportation, but ultimately the place of supply for VAT purposes would remain France. That could require registration and the charging French VAT.
Alternatively, if you supply removal services to an individual and this takes place from an EC country to a Non-EC country. Then the VAT is calculated where the service physically takes place in proportion to the total distance covered. This means a reasonable apportionment is required.
If you have a removal job from France to the USA, the distance covered is 3,600 miles of which 300 miles is in France (from the starting point to the port) and the cost of the job is £10,000. Then that's 8.33% of the cost (300/3600) that would be subject to French VAT at £833. The remaining £9,167 would be outside the scope of EC VAT. It may be possible to use other apportionment methods e.g. the respective costs of each leg of the transportation.
Usually sub-contractor services work in a manner where the sub-contractor (you) will supply the main contractor who has the contract with the customer. That means as the sub-contractor, you’re supplying an organisation and will therefore need to apply VAT rules for businesses. Again this means the place of supply is where your customer is located.
If you’re based in the UK and a French remover contracts work to you to move goods from the UK to Germany, then the place of supply is in France. That’s because as the sub-contractor your customer is the French remover who is based in France.
The way this the works is it’s treated as a standard business to business supply and the UK remover should not charge UK VAT. Instead the French remover is required to self-account French VAT under reverse charge rules. The UK sub-contractor should show the French contractor’s VAT number on its sales invoice and state, “this supply may be subject to local VAT under the reverse charge rules.”
This blog post only covers the VAT liability of UK removal businesses to private individuals who may be located in the UK, a European Union country (“EC”), or a non-European Union country (“non-EC”).
The term customer in most cases means someone who is not registered for VAT in the country they're located in. This is important because the VAT rules surrounding VAT registered businesses are different. Some EC member states allow non-VAT registered businesses to be treated as a VAT registered business, but for the sake of consistency we would suggest that if a customer is unable to provide a VAT number in their location, they should be treated as a private individual and not a company.
The content of this post is up to date and relevant as at 13/11/2015.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
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