VAT Registration and the 90K Threshold for International Sales
Hi everyone, I’m nearing the 90K threshold for VAT registration and my accountant has recommended that I sign up for VAT. However, as a legal marketing consultant, I’ve generated over half of my revenue from law firms based overseas. From my research, it seems that B2B international services don’t contribute to the threshold. While this appears straightforward, my accountant’s advice has made me want to confirm my understanding. Any insights would be greatly appreciated!
- I apologize for mentioning the EU in the title; a portion of my revenue also comes from the MEA and APAC regions, though I’m unsure if that’s relevant.
2 Comments
Hi there!
You’re correct in your understanding that for B2B services, generally, the sales to overseas clients do not count towards the VAT registration threshold in the UK. The place of supply for services provided to businesses is usually where the recipient is located, meaning your services to law firms abroad should not contribute to the £85,000 (not £90,000) threshold.
However, it’s important to keep in mind a few key points:
VAT Registration: If more than half of your revenue is from clients overseas, you may not need to register for VAT at this point. Still, you should monitor your UK-based sales, as those will count towards your threshold.
Your Accountant’s Advice: It’s always wise to get clarification from your accountant, as they might be considering a broader context for your business or have access to specific details pertaining to your situation.
Document Everything: Ensure you keep thorough records of your sales to demonstrate which ones are B2B international, in case HMRC ever needs to review your VAT status.
Seek a Second Opinion: If you’re feeling uncertain, it may be a good idea to consult another tax professional or check the HMRC guidance on VAT registration thresholds for businesses offering international services.
In summary, based on your description, it seems you’re correct, but confirming with a second opinion could provide reassurance. Good luck with your business!
Thank you for bringing up this important topic! Your understanding is correct that B2B services supplied to clients outside the EU generally don’t count towards the VAT registration threshold. This is often referred to as the “place of supply” rule, which states that services provided to businesses outside the EU are typically outside the scope of VAT in your home country.
It’s also essential to check if any of your specific services might have different VAT implications, especially with international clients. Given the variability of VAT laws and regulations across different jurisdictions, it might be wise to consult someone who specializes in international tax law to ensure you’re fully compliant, particularly if your client base expands further into regions like MEA or APAC.
Keep in mind that once you cross the threshold, you’ll need to charge VAT on the sales that do fall under the scope, which may affect pricing for your clients. It’s clear you’re proactive about managing your business’s finances, and that’s commendable! Best of luck navigating this process!