On 1 December 2012, following a ruling in a European Court case, HMRC will be withdrawing the VAT registration threshold for Non-Established Taxable Persons (NETPs). An NETP is an individual whose normal place of residence is outside the UK or a corporate body that is incorporated outside the UK and has no “establishment” in the UK. These persons must register with HMRC as soon as they expect to be making taxable supplies in the UK which cannot be dealt with under the reverse charge procedure.
This is unlikely to affect business to business supplies because in most cases the UK business receiving the supply accounts for the VAT under the reverse charge procedure. The overseas supplier has no need to register in the UK because the customer deals with the VAT.
Most supplies by NETPs based in other EU countries to non-business customers are also likely to remain unaffected – supplies of goods are covered by the existing distance selling regulations and supplies of services will mostly be subject to VAT in the supplier’s country.
However, some supplies are deemed to be made where they are performed and in the case of supplies related to land, where the land is situated. Therefore if a “where performed” service is supplied in the UK by an NETP to a non-registered person the supplier must register for VAT in the UK and charge VAT on the supply. Similarly, if an NETP supplies a service related to land in the UK to a non-registered person the NETP must register in the UK and charge VAT.
An example of the first type of service could be an entertainer based in Italy who is engaged to perform at a private party in the UK. An example of the second is a builder based in the Irish Republic who carries out some work for a private individual on a house in Belfast.
It will also apply to traders who come to the UK to sell goods at street markets etc.
This gives rise to some odd situations. A small business that is below the registration threshold and so is not required to be registered in its own country may be required to be registered in the UK. An overseas supplier that makes supplies to both business and non-business customers in the UK will have to treat them differently. However, it will be able to claim the VAT on any expenses it incurs in the UK in making either type of supply through its UK VAT registration.
NETPs wanting to deal with their own VAT can register for VAT in the UK using the VAT online service, otherwise, paper applications can be sent to the following address:
Non-Established Taxable Persons Unit
HM Revenue & Customs
8 Ruby Place
Alternatively, NETPs can appoint an agent or representative in the UK to deal with their UK tax affairs.
More details are in Revenue & Customs Brief 31/12 available from the HMRC website.