Any Vat Experts? Unique Case Sort Of

stringer_bell

Hi All,
I'm waiting for my appointment with vat specialist, but thoughts running through my mind now. I got a letter from HMRC regarding vat registration enquiry. I make xxx,xxx yearly profit, but I was told I never needed to register for VAT. I'm a sole trader

I own adult website which sells digital downloads and ad space to non-EU customers ( individuals, not businesses ) They pay by dollars and its all contained in my credit card processor

My EU sales do not come close to the threshold

Am I right in thinking I don't need to be vat registered?

anamenottaken

stringer_bell wrote: »

Hi All,
I'm waiting for my appointment with vat specialist, but thoughts running through my mind now. I got a letter from HMRC regarding vat registration enquiry. I make xxx,xxx yearly profit, but I was told I never needed to register for VAT. I'm a sole trader

I own adult website which sells digital downloads and ad space to non-EU customers ( individuals, not businesses ) They pay by dollars and its all contained in my credit card processor

My EU sales do not come close to the threshold

Am I right in thinking I don't need to be vat registered?

The threshold figure for compulsory VAT registration is for turnover, not profit.

phill99

Correct. The threshold is based on turnover, not profit.

stringer_bell

Hello,
My turnover/profit for EU sales does not come close to the threshold

I should of made that clear

CKhalvashi

Export sales, unless running through a company outside the UK (this will need to be the equivalent of Ltd/LLP/PLC), would need to come under the threshold, too.

As you're presumably coming under royalty income, Luxembourg may be the place to look, however speak to an accountant before taking this option.

Did your accountant not pick this up? It's well known that you need to register for VAT over a certain allowance (c.£80k this year)

CK

Wywth

stringer_bell wrote: »

Hi All,
I'm waiting for my appointment with vat specialist, but thoughts running through my mind now. I got a letter from HMRC regarding vat registration enquiry. I make xxx,xxx yearly profit, but I was told I never needed to register for VAT. I'm a sole trader

I own adult website which sells digital downloads and ad space to non-EU customers ( individuals, not businesses ) They pay by dollars and its all contained in my credit card processor

My EU sales do not come close to the threshold

Am I right in thinking I don't need to be vat registered?

What's unique about your situation (other than all business are unique in their own way) :huh:

If you really make the order of magnitude of profit you boast of, then I suggest to you that you are indeed earning over the VAT registration threshold for turnover, despite your claims to the contrary.

It doesn't matter where your customers live, but rather where you supply from

If you are in the UK and the place of supply of your service is in the UK, you charge and account for VAT according to UK VAT rules.

http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm

Similarly, it matters not in which currency you agree to be paid. But ...

You can invoice for the goods and services that you supply in any currency. However, if there is any UK VAT due on the transaction, then your invoices must also show the following in sterling:

• the total net value of goods and services at each VAT rate
• the amount of VAT, if any, at each rate

You do not need to show sterling figures for each line on the invoice.

http://www.hmrc.gov.uk/vat/managing/international/foreign-currency.htm

Of course, you can only legally charge VAT if you are registered for VAT.
But you may still be liable for the VAT

martindow

stringer_bell wrote: »

I make xxx,xxx yearly profit, but I was told I never needed to register for VAT. I'm a sole trader

If you make six figure profits your turnover must be enormous as will be your VAT liability and fines for late registration and payment. Never being told you needed to register is not going to carry any weight I'm afraid. I think you need to get a suitably qualified and experienced accountant or tax advisor to try and get you out of this as well as can be managed.

I suppose the only positive is that I assume that no VAT would be charged sales outside the EU (unless this is different with digital downloads) so they will only be chasing VAT on UK and other EU trading.

Wywth

martindow wrote: »

If you make six figure profits your turnover must be enormous as will be your VAT liability and fines for late registration and payment. Never being told you needed to register is not going to carry any weight I'm afraid. I think you need to get a suitably qualified and experienced accountant or tax advisor to try and get you out of this as well as can be managed.

I suppose the only positive is that I assume that no VAT would be charged sales outside the EU (unless this is different with digital downloads) so they will only be chasing VAT on UK and other EU trading.

If the place of supply of your service is not in the EU, then your supply of services is outside the scope of VAT. You don't have to charge EU VAT or include the sale on your VAT Return.

See the link in my previous post

If you supply goods and services both inside and outside the UK, then you may need to register for UK VAT if the value of your UK supplies alone exceeds the registration threshold.
You don't need to include supplies you make in other countries when calculating your VAT taxable turnover for registration purposes - so leave out of your calculation any goods and services you supply where the place of supply is another country rather than the UK.

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#4

LittleVoice

stringer_bell wrote: »

Hello,
My turnover/profit for EU sales does not come close to the threshold

I should of made that clear

As profit is not the same as turnover, why do you continue to write about "profit"?

Pennywise

LittleVoice wrote: »

As profit is not the same as turnover, why do you continue to write about "profit"?

Turnover may well be very similar to profit for a website selling downloads and ads. If it's affiliate based, there could be very few costs & overheads.

As for VAT there are special rules for electronically supplied services - the usual "export" rules for physical items don't apply. The place of supply is where the customer is located. If the customer is located outside the EU, then those sales are "outside the scope" and aren't taken into account at all for VAT registration or return purposes. The OP won't need to register unless at least £79k (current limit) of his sales/turnover are within the EU.

The OP has to hope that they have good sales records which can analyse the sales/turnover into the different product types and into the different countries to present to the tax inspector to justify their stance that VAT registration is not required. Also good to have printed out HMRC's own VAT manuals re digital exports etc to show to the tax inspector as some aren't particularly well informed about this kind of detail. They may well go away and refer the facts up to specialists.