Goods Sent From Other EU Country - What Type of Sale??


M

Michael

If someone is tax resident and generally based in one EU country, but
they come to the UK for a few days and (in the course of their usual
business), they sell goods at a market stall then this is considered a
"non-resident supply" of goods.

The VAT threshold for the non-resident supply of goods in the UK is, I
believe, £55,000

If someone is tax resident and generally based in one EU country, but
they sell goods by *post* to a retail customer in the UK, then this is
considered a "distance sale" of goods.

The VAT threshold for the distance sale of goods in the UK is, I
believe, £70,000 If the person based in another EU country sells
goods to UK customers by means of distance sales, then they would be
required to become UK VAT-registered if these annual sales were to
equal or exceed £70,000

If someone based in another EU country were to (in the course of
business) send goods *by post* to be sold on their behalf in a UK
auction, is this considered a "non-resident supply" of goods, or a
"distance sale" of goods? Assuming the UK auction house is UK VAT
registered, and the customers purchasing the goods at the auction are
not VAT registered.
 
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R

Ronald Raygun

Michael said:
If someone is tax resident and generally based in one EU country, but
they come to the UK for a few days and (in the course of their usual
business), they sell goods at a market stall then this is considered a
"non-resident supply" of goods.

The VAT threshold for the non-resident supply of goods in the UK is, I
believe, £55,000

If someone is tax resident and generally based in one EU country, but
they sell goods by *post* to a retail customer in the UK, then this is
considered a "distance sale" of goods.

The VAT threshold for the distance sale of goods in the UK is, I
believe, £70,000 If the person based in another EU country sells
goods to UK customers by means of distance sales, then they would be
required to become UK VAT-registered if these annual sales were to
equal or exceed £70,000

If someone based in another EU country were to (in the course of
business) send goods *by post* to be sold on their behalf in a UK
auction, is this considered a "non-resident supply" of goods, or a
"distance sale" of goods?
I would guess this would be neither non-resident nor distance supply,
but resident supply. He is importing the goods prior to sale, and
then selling them locally, hence the domestic threshold of £56,000
should apply.
Assuming the UK auction house is UK VAT
registered, and the customers purchasing the goods at the auction are
not VAT registered.
I would guess the auction house's VAT status is irrelevant. They
are not buying the goods and selling them on, they are simply
facilitating the sale on behalf of the seller. It is the original
seller who is actually making the supply. There will be VAT on the
auctioneer's fee, but not necessarily on the actual price of the goods.
 
R

Ronald Raygun

Michael said:
The business (sole trader) would be based in another EU country, so
the trader would *not* be UK resident; so I don't think it could be a
resident supply.

The sole-trader based abroad posts the goods to the UK auction house
to be sold on behalf of the same sole-trader; so I would think it
would be either a non-resident supply or a distance sale.

Would I be wrong in thinking this?
No-one more knowledgable has chipped in yet so here I am again.

I didn't read your definition of non-resident supply closely
enough, and on reflection I think your example matches this more
closely than that of a distance sale. The key issue is not
whether the seller actually visits the UK in person with the goods,
but rather that the act of selling takes place locally in the UK
(albeit by a UK agent - the auctioneer) and not "at a distance" by
directly involving the distant supplier.

I think that if the agent actually took ownership of the goods and
then sold them on his own behalf, then this would be two transactions,
a distance sale followed by a resident sale, but as he is only an
agent acting on the distant supplier's behalf it seems more like as
if the supplier were in the UK in person, and it is therefore a
non-resident sale. The fact that the seller is there by proxy rather
than in the flesh is unlikely to make a difference.

Either way, if the relevant turnover is above £56k but below £70k,
then even if the distant supplier could avoid registering by involving
a UK agent acting on his own behalf, then this agent would need to
register. So if the question behind the question is whether the
end-customer will need to pay VAT, and the supplier's profit margin
will therefore suffer, the answer is yes.
 
M

Michael

No-one more knowledgable has chipped in yet so here I am again.

I didn't read your definition of non-resident supply closely
enough, and on reflection I think your example matches this more
closely than that of a distance sale. The key issue is not
whether the seller actually visits the UK in person with the goods,
but rather that the act of selling takes place locally in the UK
(albeit by a UK agent - the auctioneer) and not "at a distance" by
directly involving the distant supplier.

I think that if the agent actually took ownership of the goods and
then sold them on his own behalf, then this would be two transactions,
a distance sale followed by a resident sale, but as he is only an
agent acting on the distant supplier's behalf it seems more like as
if the supplier were in the UK in person, and it is therefore a
non-resident sale. The fact that the seller is there by proxy rather
than in the flesh is unlikely to make a difference.

Either way, if the relevant turnover is above £56k but below £70k,
then even if the distant supplier could avoid registering by involving
a UK agent acting on his own behalf, then this agent would need to
register. So if the question behind the question is whether the
end-customer will need to pay VAT, and the supplier's profit margin
will therefore suffer, the answer is yes.

thank you for this. That's what I was sort of thinking - that it
would be a non-resident supply of goods.

It's good just to get a second opinion to reassure me I'm thinking
along the right lines!

If the relevant turnover was instead *below* £56k would the
end-customer at the UK auction pay VAT as the goods have come from a
non-resident supplier who is *not* UK-VAT-registered (as turnover
below £56k).

In either of these scenarios

a) Non-Resident Supplier in other EU country *is* VAT registered in
their own country
b) Non-Resident Supplier in other EU country is *not* VAT registered
in their own country
 
R

Ronald Raygun

Michael said:
thank you for this. That's what I was sort of thinking - that it
would be a non-resident supply of goods.

It's good just to get a second opinion to reassure me I'm thinking
along the right lines!

If the relevant turnover was instead *below* £56k would the
end-customer at the UK auction pay VAT as the goods have come from a
non-resident supplier who is *not* UK-VAT-registered (as turnover
below £56k).

In either of these scenarios

a) Non-Resident Supplier in other EU country *is* VAT registered in
their own country
Well, then the supplier would presumably be obliged by the rules
of his own country to charge VAT on any supplies he makes both
within his country and anywhere else within the EU.
b) Non-Resident Supplier in other EU country is *not* VAT registered
in their own country
In this case I expect not. The supplier being registered neither
here nor there means he could not under any circumstances charge
VAT. The only question would be VAT on the auctioneer's fee.

Be aware that different countries operate different flavours of rule.
When I bought some services from a boat yard in Portugal they wanted
me to give them my "tax number" and context made it clear it had
something to do with VAT. The chap implied that everybody had one,
which all seemed a bit odd but I gave them my NI number, which at
least gave them something to put on their little forms.
 
M

Michael

Well, then the supplier would presumably be obliged by the rules
of his own country to charge VAT on any supplies he makes both
within his country and anywhere else within the EU.


In this case I expect not. The supplier being registered neither
here nor there means he could not under any circumstances charge
VAT. The only question would be VAT on the auctioneer's fee.
thanks again.

a) I suppose if the relevant turnover is *below* £56,000 and also the
trader *is* VAT registered in their own EU country then it would be
quite difficult for them to charge VAT (from their own country), as
they would not know at what price the goods will actually sell for,
and also they would not actually know who the customers are (if the
goods are sold in a UK auction).

b) If the relevant turnover is still *below* £56,000 and the trader is
*not* VAT registered in their own EU country; - I wonder if the trader
would have the same profit margin than if they were instead resident
in the UK and *not* UK-VAT-registered either? (all other things being
equal)

I suppose in option (b) it would not make any difference to the
traders profit margin to be not VAT-registered anywhere but trading
from another EU country; than if they were not VAT-registered anywhere
but trading from within the UK?

I remember hearing that in such a situation UK auction houses (given
the option) would prefer to deal with a trader resident in another EU
country. Something to do with VAT, I'm not sure what though. Though
if I remember correctly the auction houses were better off dealing
with non-resident traders. Though, maybe I have the wrong end of the
stick altogether....!
 
R

Ronald Raygun

Michael said:
a) I suppose if the relevant turnover is *below* £56,000 and also the
trader *is* VAT registered in their own EU country then it would be
quite difficult for them to charge VAT (from their own country), as
they would not know at what price the goods will actually sell for,
Wrong. The auction will establish a VAT-inclusive selling price.
Once the sale has taken place, the seller will know exactly how much
VAT to pay to his home tax man. No VAT will go to HMCE.
and also they would not actually know who the customers are (if the
goods are sold in a UK auction).
Once the sale has happened, the customer will be known. The VAT
status of the customer will determine whether the customer is allowed
to pay net of VAT. I'm not quite sure how this is done, he will
either be able to reclaim from HMCE in the usual way (despite the
original VAT having been paid to their foreign counterpart), or
there may be some arrangement whereby the seller, if supplied with
a valid UK VAT reg no, can sell net of VAT.
b) If the relevant turnover is still *below* £56,000 and the trader is
*not* VAT registered in their own EU country; - I wonder if the trader
would have the same profit margin than if they were instead resident
in the UK and *not* UK-VAT-registered either? (all other things being
equal)
I'm sure the position would be the same.
I suppose in option (b) it would not make any difference to the
traders profit margin to be not VAT-registered anywhere but trading
from another EU country; than if they were not VAT-registered anywhere
but trading from within the UK?
Exactly.

I remember hearing that in such a situation UK auction houses (given
the option) would prefer to deal with a trader resident in another EU
country. Something to do with VAT, I'm not sure what though. Though
if I remember correctly the auction houses were better off dealing
with non-resident traders.
That sounds like rubbish. Why would an auction house be better off
dealing with non-resident traders than resident traders? The bulk
of their business will come from residents, surely.
 
M

Michael

Michael said:
Wrong. The auction will establish a VAT-inclusive selling price.
Once the sale has taken place, the seller will know exactly how much
VAT to pay to his home tax man. No VAT will go to HMCE.

"No VAT will go to HMCE" - but instead to the other EU country tax
dept.

Therefore I suppose the trader would have a higher profit margin if
resident in the UK and tax-resident / trading from the UK, than
instead of being resident in another EU country and being
VAT-registered in the other EU country.

As, if he was tax-resident & VAT registered in the UK, he could
reclaim the VAT element of the auctioneer's commission, whereas if the
trader was resident in and VAT-registered in another EU country he
could *not* reclaim the UK VAT element of the auctioneer's commission.

That sounds like rubbish. Why would an auction house be better off
dealing with non-resident traders than resident traders? The bulk
of their business will come from residents, surely.
Maybe I didn't phrase this well; what I really mean is I remember
hearing that if an auctioneer dealt with goods from a trader who was
based in another EU country then the auctioneer would be in some way
better off either VAT or Tax wise.

That is, better off for just those sales from the EU trader, than if
the same goods had come from UK resident trader.

Though on reflection, I'm not sure if it would really make any
difference.
 
R

Ronald Raygun

Michael said:
"No VAT will go to HMCE" - but instead to the other EU country tax
dept.
Yes, that's what I meant.
Therefore I suppose the trader would have a higher profit margin if
resident in the UK and tax-resident / trading from the UK, than
instead of being resident in another EU country and being
VAT-registered in the other EU country.
In both cases the trader's margin is reduced by VAT, which if
UK-resident would go to HMCE and if non-UK EU-resident would
go to HMCE's foreign equivalent. So the profit margins should
be exactly the same, except inasmuch as the VAT rates differ
between the UK and the relevant other country.
As, if he was tax-resident & VAT registered in the UK, he could
reclaim the VAT element of the auctioneer's commission, whereas if the
trader was resident in and VAT-registered in another EU country he
could *not* reclaim the UK VAT element of the auctioneer's commission.
Why not?
Maybe I didn't phrase this well; what I really mean is I remember
hearing that if an auctioneer dealt with goods from a trader who was
based in another EU country then the auctioneer would be in some way
better off either VAT or Tax wise.

That is, better off for just those sales from the EU trader, than if
the same goods had come from UK resident trader.

Though on reflection, I'm not sure if it would really make any
difference.
Still doesn't make sense. The auctioneer provides a service and
charges for it, and that's pretty well the end of the story. If
there's a difference, if anything it would be worse dealing with
the foreigner because the paperwork, being non-standard, would
be more trouble to deal with.

Another possibility is that it might not matter anyway, if the deal
is that the auctioneer's commission is charged to the purchaser
instead of to the seller, which I gather is sometimes done.
 
R

Robert Killington

If someone is tax resident and generally based in one EU country, but
they come to the UK for a few days and (in the course of their usual
business), they sell goods at a market stall then this is considered a
"non-resident supply" of goods.
There isn't, for UK VAT purposes, a supply that is considered to be
non-resident. In the circumstances you describe, the supply would be
made in the UK and be subject the UK VAT rules.
The VAT threshold for the non-resident supply of goods in the UK is, I
believe, £55,000
The standard VAT registration limit would apply, and that is currently
£56,000.
If someone is tax resident and generally based in one EU country, but
they sell goods by *post* to a retail customer in the UK, then this is
considered a "distance sale" of goods.
Correct.

The VAT threshold for the distance sale of goods in the UK is, I
believe, £70,000 If the person based in another EU country sells
goods to UK customers by means of distance sales, then they would be
required to become UK VAT-registered if these annual sales were to
equal or exceed £70,000
Correct.

If someone based in another EU country were to (in the course of
business) send goods *by post* to be sold on their behalf in a UK
auction, is this considered a "non-resident supply" of goods, or a
"distance sale" of goods? Assuming the UK auction house is UK VAT
registered, and the customers purchasing the goods at the auction are
not VAT registered.
There are special rules for Auction Houses and I am not familiar with
them. If this is an area of concern, I suggest you have a look at the
relevant guidance on the Customs & Excise website - www.hmce.gov.uk.

Best wishes

Robert Killington
visit http://www.vatark.co.uk/
for help with VAT

To contact me by e-mail please go via my website.
 
M

Michael

Ronald Raygun said:
Yes, that's what I meant.


In both cases the trader's margin is reduced by VAT, which if
UK-resident would go to HMCE and if non-UK EU-resident would
go to HMCE's foreign equivalent. So the profit margins should
be exactly the same, except inasmuch as the VAT rates differ
between the UK and the relevant other country.


Why not?
I just assumed that in order for the trader (resident in another EU
country) to reclaim the UK VAT on the auctioneers commission he would
have to become UK-VAT-registered.

I assumed that it would not be enough for him to be VAT registered
only in his own country. Maybe I'm wrong in thinking this?

Still doesn't make sense. The auctioneer provides a service and
charges for it, and that's pretty well the end of the story. If
there's a difference, if anything it would be worse dealing with
the foreigner because the paperwork, being non-standard, would
be more trouble to deal with.

Another possibility is that it might not matter anyway, if the deal
is that the auctioneer's commission is charged to the purchaser
instead of to the seller, which I gather is sometimes done.

Yes, I think this correct. Personally I can't see any advantage to
the auctioneer.
 
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R

Ronald Raygun

Michael said:
I just assumed that in order for the trader (resident in another EU
country) to reclaim the UK VAT on the auctioneers commission he would
have to become UK-VAT-registered.

I assumed that it would not be enough for him to be VAT registered
only in his own country. Maybe I'm wrong in thinking this?
I should jolly well hope you are. I assume the general principle of
how VAT works is that anyone registered anywhere in the EU can
reclaim it on goods bought anywhere in the EU. I reckon forcing
traders who do a lot of selling into a particular EU country to
register in that country (as well as, of course, in their own)
is a mere administrative expediency to reduce the amount of
cross-border VAT money flow between HMCE and their counterparts.

Thus if Rolls Royce UK sells engines to Czechoslovakia (if and
when they join the EU) to put into their Skodas, any VAT they
charge Skoda will presumably be paid by RR to the Czech VAT man
and will be reclaimed from them by Skoda, bypassing HMCE altogether.

But for companies for whom export to any one EU country is not big,
there will be a different procedure, but which must achieve the
same effect at the end of the day, namely that the non-end-user
companies in the chain do not lose out in terms of inability to
recover their VAT outlays.
 
M

Michael

There isn't, for UK VAT purposes, a supply that is considered to be
non-resident. In the circumstances you describe, the supply would be
made in the UK and be subject the UK VAT rules.
Thanks for this. AFAIK in some European countries the VAT thresholds
are split into categories of resident supply, non-resident supply, and
distance supply.

So that's interesting to know that in the UK a "non-resident supply"
is treated as the same thing as a resident supply.

In case anyone's interested there's a list of them listed on the
following page in a small PDF file entitled "a comparison of EU
countries VAT details";

www.e-fs.net/vatreg.html
 
M

Michael

Ronald Raygun said:
Wrong. The auction will establish a VAT-inclusive selling price.
Once the sale has taken place, the seller will know exactly how much
VAT to pay to his home tax man. No VAT will go to HMCE.

So if the goods are sold in the UK with a VAT-inclusive selling price,
would this cause the trader based in another EU country a problem
remitting VAT back to his own C&E, as most other EU countries have a
VAT rate which is higher than in the UK.
 
R

Ronald Raygun

Michael said:
So if the goods are sold in the UK with a VAT-inclusive selling price,
would this cause the trader based in another EU country a problem
remitting VAT back to his own C&E, as most other EU countries have a
VAT rate which is higher than in the UK.
Yes, if you consider it to be "a problem" that his profit margin
will be dented as a result of deducting VAT at a higher rate. In
that case it could be of advantage to register in the UK, even
voluntarily.

AIUI if the trader is VAT registered, then he *must* charge VAT
on all supplies he makes within the EU.

If he is registered only at home, he must apply the home VAT rate.

If he is registered both at home and in the UK, I don't think there
is a choice, he must apply UK VAT to UK supplies, and home VAT to
home supplies (as well as to non-UK non-home EU supplies if not
also registered in the third country in question).

If he is registered only in the UK, he must apply the UK VAT rate,
but presumably only in respect of supplies to the UK. I'm not sure
if it's even possible to be registered in a non-home country without
also being registered at home. Otherwise the anomalous situation
could arise whereby if his business specialised in exporting to the
UK, while making only insignificant supplies at home, that he would
be charging UK VAT on the few home (and non-UK non-home) supplies
he makes.
 
M

Michael

Ronald Raygun said:
Yes, if you consider it to be "a problem" that his profit margin
will be dented as a result of deducting VAT at a higher rate. In
that case it could be of advantage to register in the UK, even
voluntarily.

If the trader was registered in both the UK & also elsewhere, would
this mean the VAT (from the UK sales) is still remitted back to the
traders C&E at home, or in this case does it go to HMCE (i.e. as he's
also registered in the UK)?

AIUI if the trader is VAT registered, then he *must* charge VAT
on all supplies he makes within the EU.

If he is registered only at home, he must apply the home VAT rate.

If he is registered both at home and in the UK, I don't think there
is a choice, he must apply UK VAT to UK supplies, and home VAT to
home supplies (as well as to non-UK non-home EU supplies if not
also registered in the third country in question).

If he is registered only in the UK, he must apply the UK VAT rate,
but presumably only in respect of supplies to the UK. I'm not sure
if it's even possible to be registered in a non-home country without
also being registered at home. Otherwise the anomalous situation
could arise whereby if his business specialised in exporting to the
UK, while making only insignificant supplies at home, that he would
be charging UK VAT on the few home (and non-UK non-home) supplies
he makes.
It's interesting to note here that the UK has the highest VAT
registration threshold in Europe (it's maybe similar to France); but
most/all other European countries have relatively low thresholds.
 
R

Ronald Raygun

Michael said:
If the trader was registered in both the UK & also elsewhere, would
this mean the VAT (from the UK sales) is still remitted back to the
traders C&E at home,
As I hinted already, the answer really has to be no.
or in this case does it go to HMCE (i.e. as he's
also registered in the UK)?
Presumably. What, otherwise, would be the point of
requiring UK registration for foreign traders?
 
R

Ronald Raygun

Michael said:
Just out of curiosity, if the trader was not resident in another EU
country, but was instead based [outside the EU], I wonder how things
would be affected in this scenario?

Upon entry to the UK, the auctioneer has not bought the goods, and the
goods have not actually been sold to anyone. In such a scenario,
would it be possible for HMCE to charge the VAT/duties to the trader
[abroad]?

Or is the recipient of goods into the UK (from outside the EU) always
responsible for the UK VAT?
It would tend to be either the carrier or the recipient, acting as
agent for the owner. Getting involved in sending tax bills abroad,
and locking up the goods in a warehouse until the tax is paid, is
more hassle than HMCE would wish to be involved in, I'd have thought.

Remember, the tax is due on import, even with no change of ownership.
If you bring your Channel Islands registered yacht into the UK, you
have to pay VAT on it.
 
K

Keith

Michael said:
By chance, have you ever heard of any suggestions of plans to
introduce a separate "non-resident supply" of goods for VAT purposes
in the UK? In the sense that some other EU countries have a separate
"non-resident supply" of goods VAT category.
Can you please qualify the ".. some other EU countries have a
non-resident supply status..." ?

I trust you're not referring to triangulation.. ?

Notwithstanding others within this group who have interest in such
technical matters, this particular piece of information is new.. and
worthy of exploitation.. from my company's pov.

Please take to email - this is offtopic for ukba.
 
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A

ali_gi

Just out of curiosity, if the trader was not resident in another EU
country, but was instead based in a Crown Dependency (as an example,
Gibraltar), I wonder how things would be affected in this scenario?
Hey, Gibraltar IS part of the EU, just not the stinking
VAT scam that yous has to pay on IMPORTASIAN

Consult the noticias of da VATMAN
 

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