Vat for a global distribution agreement


D

david m wicker

The VAT number 0845 010 9000 is either unavailable or when I get
through they say the vat advisors are too busy to take my calls, so I
wonder if you guys could help me

I am advising a client with a software business. He wishes to engage a
distributor to distribute his products globally. I understand that the
distributor, if UK based does not pay vat on exports. However when the
distributor periodically advises my client of the values of the
products he has sold, my client need to raise a vat invoice to this
distributor. This appears an anomaly insofar as the distributor will
not have received any vat from his overseas clients.

Please advise.

Many thanks
David
Regards

David M Wicker
www.reflexology-gemma.co.uk
Guildford UK
 
J

jpointon

The VAT number 0845 010 9000 is either unavailable or when I get
through they say the vat advisors are too busy to take my calls, so I
wonder if you guys could help me

I am advising a client with a software business. He wishes to engage a
distributor to distribute his products globally. I understand that the
distributor, if UK based does not pay vat on exports. However when the
distributor periodically advises my client of the values of the
products he has sold, my client need to raise a vat invoice to this
distributor. This appears an  anomaly insofar as the distributor will
not have received any vat from his overseas clients.

Please advise.

Many thanks
David
Regards

David M Wickerwww.reflexology-gemma.co.uk
Guildford UK
You do not make it clear:

- whether you will be in receipy of a one-off lump sum for your rights
in the software, or
- whether you willl recive az series of periodic royalty payments, or
- whether you are making the software available to your distributor in
physical format (CD/DVDs) or supplying a master copy from which the
distributor will make furher copies for physical or electronic
distribution upon which you will receive a royalty.

LUMP SUM PAYMENT

A permanent transfer of rights is a single supply of services to which
the normal tax point rules apply. The basic tax point occurs at the
time the rights are assigned.

ROYALTIES

Very often the contract will provide for the person assigning the
rights to receive future periodic payments of royalties, or repeat
fees and the like, based, for example, on the level of subsequent
sales . Regulation 91 of the VAT Regulations 1995 applies wherever
some, or all, of the consideration is dependent on future events. This
overrides the basic tax point rules and restricts the time of supply
to the earlier of the receipt of payment or the issue of a VAT
invoice.


CD/DVD

As the distriutor is UK based you will charge them VAT at the standard
rate on each set of discs supplied. They will claim the VAT charged as
input tax on their VAT return to set off against any VAT chargeable -
whether at zero or standard rate on their sales of your software.

As far as the distributor'' VAT position is concerned it is immaterial
whether ypu receve a lump sum, a seroes of royalty payments or sell
them discs for distribution. You will charge tem VAT at the standard
rate which they will claim as input tax on their own VAT returns.



John Pointon
Accountant, Tax and Business Consultant
01270-763466
 
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R

Ronald Raygun

You do not make it clear:

- whether you will be in receipy of a one-off lump sum for your rights
in the software, or
- whether you willl recive az series of periodic royalty payments, or
- whether you are making the software available to your distributor in
physical format (CD/DVDs) or supplying a master copy from which the
distributor will make furher copies for physical or electronic
distribution upon which you will receive a royalty.

LUMP SUM PAYMENT

A permanent transfer of rights is a single supply of services to which
the normal tax point rules apply. The basic tax point occurs at the
time the rights are assigned.

ROYALTIES

Very often the contract will provide for the person assigning the
rights to receive future periodic payments of royalties, or repeat
fees and the like, based, for example, on the level of subsequent
sales . Regulation 91 of the VAT Regulations 1995 applies wherever
some, or all, of the consideration is dependent on future events. This
overrides the basic tax point rules and restricts the time of supply
to the earlier of the receipt of payment or the issue of a VAT
invoice.

CD/DVD

As the distriutor is UK based you will charge them VAT at the standard
rate on each set of discs supplied. They will claim the VAT charged as
input tax on their VAT return to set off against any VAT chargeable -
whether at zero or standard rate on their sales of your software.

As far as the distributor'' VAT position is concerned it is immaterial
whether ypu receve a lump sum, a seroes of royalty payments or sell
them discs for distribution. You will charge tem VAT at the standard
rate which they will claim as input tax on their own VAT returns.
Your comprehensive reply goes beyond what I think the OP wants or needs
to know. The "anomaly" he sees is that his distributor would be paying
him VAT which he does not actually collect. The resolution of the anomaly
is simply that the distributor gets all the VAT back from the government.

Often this will take the form of a reduced VAT bill for the distributor
(in cases where the distributor also makes substantial UK supplies), but
where the distributor specialises exclusively in exporting, his VAT bills
will all be negative and the government will be paying him real money,
to reimburse him for the VAT he pays to his suppliers.
 

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