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January 2010 - VAT Changes for Overseas purchases
From 1 January 2010 you need to check the value of services purchased from overseas suppliers.
They are now subject to something called "Reverse charge". This means that you have to include
these purchases as both an input and output tax item. This for most businesses has no effect to
your overall VAT liability, but there are two potential areas where it might. Firstly if you
are what is known as "partially exempt" - that is you are only able to claim back a proportion
of your input tax and the second situation is where you are not VAT registered, but you are
close to the registration threshold (currently £68,000). You need to add the value of these
purchases to your turnover and together they may take you over the limit. This needs constant
monitoring because as soon as you go over the limit in any 12 month period you have 30 days to
register for VAT.
It does not matter whether the supplier you are purchasing the service from is registered for VAT
or not. You still have to apply the reverse charge treatment to the value of the service received.
If you are not sure about when you should apply the reverse charge or whether you need to register
for VAT please give us a call
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