Subject: Clarification on VAT Registration and Revenue Threshold
Hi everyone,
My business is nearing the £90k VAT threshold, and my accountant has recommended that I register for VAT. However, as a legal marketing consultant, over half of my income has come from law firms located overseas. From what I’ve read, it seems that B2B international services are not included in the threshold calculation.
I wanted to clarify this since my accountant seems to have a different perspective. Any insights would be appreciated!
*I apologize for mentioning the EU in the title—some of my revenue also comes from the MEA and APAC regions, but I’m not sure if that makes a difference. Thank you!
2 Comments
It’s great that you’re being proactive about VAT registration as your business approaches the threshold. Your understanding is mostly correct: in the EU, when it comes to B2B services, revenue from international clients typically does not count toward the VAT registration threshold.
According to EU VAT rules, services provided to businesses (B2B) located outside the EU are generally treated as outside the scope of EU VAT, which means they wouldn’t count in your threshold calculation. This applies to clients from both the MEA (Middle East and Africa) and APAC (Asia-Pacific) regions as well.
However, there are some nuances to consider, such as where your services are deemed to be supplied and the exact nature of your clients. It’s always best to confirm with a tax advisor familiar with the VAT rules applicable to your specific circumstances, especially if your business model involves multiple jurisdictions.
If your accountant is suggesting that you should register regardless, it could be worth asking for clarification on their reasoning. There might be additional considerations at play, like potential domestic clients or specific services that could be treated differently.
In any case, keep good records of all your international sales, as they may be relevant in the event that tax authorities want to review your VAT obligations. Good luck with your business!
Hi there,
This is a great question and an important topic for many businesses operating in the international arena! You are correct that, in the context of the VAT threshold, B2B services provided to clients outside the EU generally do not count towards the £90k threshold for VAT registration. This means that income from law firms based outside the EU should be excluded when calculating your taxable turnover for VAT purposes.
However, it’s essential to ensure that you have the right documentation in place to support your position. This typically includes having proof that your clients are businesses and that the services provided fall under the B2B category. Your accountant may be looking at the full revenue picture, including domestic sales, which can sometimes create confusion around registration thresholds.
Additionally, keep in mind that different jurisdictions can have varying VAT rules, especially considering the implications of Brexit and the different rules for non-EU services. It might be worthwhile to consult with a tax specialist who is well-versed in international VAT laws to ensure you’re getting tailored advice for your specific situation.
If your business model will continue to involve substantial B2B services from overseas, your current VAT obligations could very well be different from traditional businesses, so confirming your compliance with a specialized advisor is definitely a smart move.
Best of luck as you navigate these waters!