Contracting overseas and EC sales list requirements
While contracting with overseas customers can add significant revenue to your business it’s important to get the tax elements right to avoid any penalties from HMRC.
If you’re a VAT registered Limited Company you must report your sales of applicable goods and services to VAT registered EU businesses by submitting an EC Sales List (ESL). However, if you have a contract with an EU client but the services are provided from the UK an EC Sale List is not required.
The list must show details of all sales in the period, no matter how small and must specifically state:
- Customer details – including the VAT registration number from their own country
- Relevant country code
- Value of the goods/services in £s sterling
If you have made no EU sales in the period then no ESL submission is required.
Should I be completing an EC Sales List?
If you fill in Box 8 of your VAT return HMRC will automatically send you an ESL. If you don’t do this HMRC have a list of other business activities which must be reported by submitting an ESL.
If your supply of goods or services to VAT registered EU businesses is small then you may be eligible to ask HMRC for permission to submit a simplified ESL. This may apply if:
- Your annual turnover is below the VAT threshold plus £25,500
- Your annual sales to other EU countries are no more than £11,000
- You do not sell New Means of Transport
With a simplified ESL you don’t need to list details of every sale, you can enter a nominal value of £1 and you only complete the ESL once a year, on a date you agree with HMRC.
If you are unclear on what kind of submission you should be making contact your accountant who will be able to advise you.
The Reverse Charge
Some services are subject to a ‘reverse charge’ meaning that the customer, not the supplier, must account for the VAT. The rules on this are complex as they are based on ‘place of supply’ of the services and refer to which country’s VAT rules should be applied to the sale. It is advisable to speak with your accountant regarding this to ensure your invoices show the correct VAT treatment.
Contracts with countries outside the EU
If the ‘place of supply’ of your service is outside the EU – eg: the USA – then your supply of services is outside the scope of EU VAT. In this case you don’t charge VAT and the sale is not included in your VAT return.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.