I am starting a new job, where by I will work in the UK and be paid by a company that is only incorporated in Canada. They have advised me that they can not pay VAT.
What do I need to do in relaition to my VAT return.
I will be working as a limited Company ( self employed contractor). As such I will be giving finanacial advice to a company based in London but incorporated in Canada. They have advised me that I will be paid via Canada and that I can not claim VAT for my services as they are not incorporated in the EU. Regards John
a few years ago I was in a similar position with a US company.
As a UK based contractor registered for VAT because you make more than the VAT registration threshhold then you must add VAT to your invoices where such supply is made within the UK. The point of supply here is London, not Canada.
If the Canadian company is not VAT registered in the UK then they will not be able to deduct the VAT paid to you directly from their VAT return (as they won't have one) however they must still pay you the VAT effectively making your services 20% more expensive.
However, as a non EU company they will be able to get the VAT back via refund based on your invoices.
The thing to note here is that as a UK contractor registered for VAT if you do not charge VAT then the amount that you receive is deemed to include VAT so you are actually signing up to a 20% cut in rate.
If you were working for the company in Canada and paid in Canada then the situation would be quite different but the situation here is that a non EU company is using a UK company to provide services.
All in all, my reading of this is that a non EU company just wants to skip the step of paying VAT that they will be able to reclaim but unfortunately, although that is the simplest route that's not the way the tax system works.
Get them to talk with their UK based accountants who will put them on the right track. Or if their accountants are in Canada get your accountant to talk to theirs.
All the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'm not a VAT expert, but would make the following comments:
1. I presume you are being paid for time, as financial advice tends to be exempt. 2. I think the service is being made in the UK (UK to UK), so you would have to charge VAT. It doesn't sound like your're exporting services.
As I mentioned, I'm not a VAT expert, and unless someone else on here has better working knowledge, would suggest getting specific advice.
