Q. A company in Portugal has asked me if I could do some development work for them. I understand that if I provide a service to a company in another EU country then I should not charge VAT, is this correct? Also I’m on the Flat Rate VAT scheme – if I accept the work, how does that affect how I handle the VAT?
A. The service to be provided to the Portuguese Company is known as a B2B supply and as a result this will be outside the scope of UK VAT.
The Portuguese Company will be required to account for Portuguese VAT on the value of your services on their own Portuguese VAT returns and as a prompt for them to do this you, on your sales invoice need to add the words “Subject to the Reverse Charge Procedure”
Also you will be required to complete and submit to HMRC a European sales List (ESL) which can be drawn down from HMRC’s website.
With regard to the Flat Rate Scheme as the supply is outside the scope of VAT the value does not get added to the turnover to which the Flat rate % is applied.
This answer was provided by Barry Hincks from Qdos Consulting
What about if the work is carried out via a UK agency ?
My understanding is that in this case you would charge VAT on the invoice to the agency.
The agency however would not charge VAT on their invoice to the end client in Portugal.
Is this correct ?
Are you sure you are right that the turnover should no be included in the flat rate calculation?
My understanding (via my accountant) was that if the final end product was to be sold in the UK/EU then VAT should be charged.
I’m in a similar position with providing software to USA clients. I charge VAT when the products could be sold in the EU, but not when it’s USA only.