Introduction

Recent UK VAT changes announced mean that from 1 December 2012, non-UK established taxable persons (NETP) no longer benefit from the UK VAT registration threshold. This mirrors the existing rule for NETP trading within Ireland.

It should be noted that the change in the UK VAT threshold for NETPs does not affect the existing distance sales threshold, nor supplies which have been zero rated due to the “place of supply rules” or supplies made using the “simplified procedure” for goods assembled and installed in the UK.

As both Ireland and the UK are part of the EU the general place of supply rules as stipulated in Council VAT Directive 2006/112/EC apply, however, both countries also have their own domestic law which can effect the obligation to register. For a visiting business cross border VAT can result in major problems and corresponding liabilities, penalties and interest charges in either or both jurisdictions.

Therefore, time spent investigating the type of supply, the contract details, and the VAT requirements is time well spent. The law on the place of supply of services is complex; it changed from 1 January 2010 and from 1 January 2011, with further changes due in January 2015.

The volume of cross-border supplies has increased significantly and there is a special rule for goods and certain services, such that they are liable to the ‘reverse charge’ mechanism, meaning the supply can be zero rated. Whether or not the reverse charge rule applies depends on:

• The location of the supplier
• The location of the customer
• The status of the customer, i.e. whether a ‘relevant business person’
• The nature of the service

We have summarised below the general VAT rules and the differing VAT registration requirements in both jurisdictions.

Basic Rule for Goods

The supply of goods to EU resident non business (private) consumers is always liable to VAT where the supplier is established unless the distance selling rules apply.

An example of a common pitfall among non-established traders is not registering or operating VAT when selling goods at a trade exhibition/show. For example, a UK trader selling goods at a trade show in Dublin is required to register and account for Irish VAT on such sales in Ireland. As of 1 December 2012 this will also be the case for Irish traders attending trade fairs in the UK.

The normal VAT treatment of goods supplied between VAT-registered traders in different Member States is as follows:

• The supply in the Member State of dispatch is zero-rated, and
• VAT is due on the acquisition of the goods in the Member State of arrival and is accounted for by the customer on their VAT Return at the rate in force in that Member State via the reverse charge mechanism

Special Rules Apply To:

• Transfer of own goods
• Temporary movement of goods
• Installed or assembled goods
• Intra EU processing/repair of goods
• Triangulation
• Supplies to diplomatic missions, consulates, visiting NATO forces etc.

Basic Rules for Services

The basic rule is that the place of supply of services to an EU private customer (‘B2C’) is the supplier's location. Thus, ‘B2C’ supplies of services are still usually liable to VAT in the member state where the supplier is based.

The place of supply of business-to-business (‘B2B’) services is generally where the customer is located. In this instance the customer must then self-account for the VAT on the service received on their own VAT return at the domestic rate in force in that EC member state.

Again there are exceptions to the basic rules for the following services:

• Services relating to the admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events
• Services directly related to land
• Intra-EU transport of goods
• Passenger transport
• Short-term hire of means of transport
• Longer term hire of transport is taxed under the basic rule, but distinguished between ‘B2B’ and ‘B2C’ customers
• Supply of services by intermediaries to non-taxable persons
• Valuations and work on movable property
• Restaurant and catering services
• Electronic services to non-taxable persons in the EU

For completeness purposes we have identified the exceptions to the general rules however, we have not outlined each rule in detail.

The following table highlights the VAT registration requirements in both the UK and ROI for common business transactions but is not exhaustive and the reader should familiarise themselves in respect of the operation of VAT in both jurisdictions.

Type of Supply	Customer location	Delivery detail	Supplier – UK trader	Supplier – Irish trader
Goods	UK non business	Via mail order	UK VAT registration required	Distance – Selling rules apply 1
Goods	ROI non business	Via mail order	Distance selling rules apply 1	ROI VAT registration required
Goods	UK business	Supply/dispatch	UK VAT registration required	intra community B2B supply
Goods	ROI business	Supply/dispatch	Intra community B2B supply	ROI VAT registration required
Goods	UK business	Assembled & installed in UK	UK VAT registration required	UK registration unless Simplified procedure applies 2
Goods	ROI Business	Assembled & installed in ROI	ROI registration if goods become fixtures otherwise intra community B2B	ROI VAT registration required.
General services	ROI or UK non business	Deemed supplied where supplier located	UK VAT registration required	ROI VAT registration required
General services	ROI business	Deemed supplied where customer located	Intra community B2B supply	ROI VAT registration required
General services	UK Business	Deemed supplied where customer located	UK VAT registration required	Intra community B2B supply
Catering services	All customers	Supplied where supplier located	UK VAT registration required	ROI VAT registration required
Passenger transport (not within Tour Operator Margin Scheme)	All customers	Supplied where transport actually takes place	UK VAT registration (not compulsory as zero rated services)	Exempt supply in ROI and VAT registration not applicable (Can reclaim VAT suffered on qualifying travel outside Ireland)
Freight transport of goods	UK Business	Supplied where customer located	UK VAT registration required	Intra community B2B supply
Freight transport of goods	ROI Business	Supplied where customer located	Intra community B2B supply	ROI VAT registration required
Freight transport of goods	Non business customer	Supplied where transport begins	UK VAT registration required	ROI VAT registration required
Hiring of transport (less than 30 days or 90 if a vessel)	All customers	Supplied where transport made available	UK VAT registration required	ROI VAT registration required
Land related services	UK or ROI Business	Supplied where land located i.e. UK or ROI	Registration required where land located. (exception in ROI if within RCT regime)	Registration required where land located. (exception in ROI if within RCT regime) 3 (exception in UK if reverse charge applies) 4
Land related services	All non business customers	Supplied where land located	Registration required where land is located	Registration required where land is located

Note: Where it is stated VAT registration is required, this assumes the relevant VAT registration threshold is exceeded. The current UK VAT registration threshold is £77,000 (reducing to nil for NETP in December 2012) while in Ireland the VAT registration threshold for the supply of services is €37,500 and €75,000 in relation to the supply of goods.

1 Distance Selling Rules

Distance selling rules apply where a person makes supplies to non-business consumers via mail order which involves removing the goods from one member state to another member state. Before the threshold for distance selling is exceeded, the supplier should charge his own domestic VAT. Once the registration threshold has been exceeded the non-established trader must register and charge VAT in the country where the customer is located. A full list of distance-selling threshold's that apply in each EU country is available from www.europa.eu.

Trader's from either the ROI or UK can voluntarily register in either country for VAT if they wish to do so.

The current distance selling thresholds for the UK and ROI are £75,000 and €35,000 respectively.

2 Simplified Procedure for Installed or Assembled Goods in the UK

If you supply goods from outside the UK to be installed or assembled in the UK your supply is liable to VAT in the UK and you may be required to register there. However, the UK operates the simplified procedure (details can be found in VAT Notice 725). You can only use this procedure if the following conditions are met;

• your customer is registered for VAT in the UK
• you are registered for VAT in another Member State , and
• you are not required to be registered in the UK for any other reason

Under the simplified procedure the UK customer is treated as acquiring the goods in the UK and must account for acquisition VAT on the full value of the supply. As a result the Irish supplier is not liable to account for the VAT.

If you are a supplier in another Member State and you wish to use these simplified arrangements you must notify HMRC of your intention giving your customer details, contract details and your own details. You must also advise your customer that you will be using the simplified procedure.

A common error made by people using this scheme is the sourcing of goods or parts in the UK which are then delivered to the customer address and or incorporated into an installation in the UK, this would be a supply of goods within the UK and therefore UK VAT registration is required and the simplified procedure is no longer an option.

3 ROI Construction Services

Non-established traders engaged in construction services are not required or entitled to account for VAT on supplies to a Principal Contractor, this is the same rule that applies to Irish resident sub-contractors working for a principal contractor within RCT. In such cases, VAT is accounted for by the Principal Contractor.

Any construction services that are not subject to Relevant Contracts Tax are taxed as normal and therefore a non-established trader would be required to register for Irish VAT immediately and charge VAT in respect of such services carried out in Ireland.

4 Reverse Charge Rule

The reverse charge rule applies to almost all B2B supplies of services except for those exceptions already identified above. The reverse charge does not apply to supplies of services where both the supplier and the customer belong in the same country. In the UK the reverse charge rule is extended to cover land related services.

A business receiving services to which the reverse charge rules apply must account for the output VAT on their own VAT return at the domestic rate in force where they are established.

The rules are complicated and careful analysis is required to avoid potential surcharges, interest and penalties in multiple jurisdictions.

Desi Foley is a Senior Manager FPM Chartered Accountants

Anne Rooney is a Director with FPM Chartered Accountants

Tele: Newry: +44 (0)28 3026 2010
Dundalk: +353 (0)42 9388898

Email: d.foley@fpmca.com
ap.rooney@fpmca.com

Website: www.fpmca.com