Freelancers’ Questions: Is freelancing for a US client VAT-free?

2 min
160
0
0
Published on

Freelancer’s Question: I recently started independent consulting. One of the first jobs is some consultancy work for a company in the US. All the work has been via e-mail / phone and is advice on data integration.

I'm about to invoice the company. My understanding is that this work is UK VAT free, as the service / goods are in effect for export. Is that right?

However will I need to pay any tax in the US? The amount is for several thousand pounds, the state is NY in the US.

Expert’s Answer: The rules relating to VAT on the supply of internationally supplied services changed on January 1st 2010. They now rely on the fundamental question of where the supply is made and as a consequence, where VAT may be charged and paid.

However, in the case of services (as compared to ‘goods’), deciding the place of supply can be more complicated than you may think. There are various rules that apply, depending on:

· whether you have more than one business location

· the kind of service you provide

· the place where your business or your business customer 'belongs'

If you are based in the UK and your customer is also based in the UK, then VAT will be chargeable on your service (assuming of course that your business is VAT registered). But if the place of supply of your service is not in the UK (or EU), then your supply of services is outside the scope of VAT. You do not have to charge VAT on your service or include the sale on your VAT Return.

In case you think that I am only stating the obvious, the question of where your customer “belongs” is not quite as straightforward as it may appear. Just because your customer is in the USA, you need to make sure that for VAT purposes, they are not considered “belonging” to the UK. The rules for belonging are quite complicated and almost certainly do not apply in your case, but just make sure that you are not dealing with a USA branch of a UK company that falls fouls of the belonging tests.

Who ever said that VAT was a simple tax?! I hope this answers you question; however further information can be found in this section of the HMRC website.

The expert was Barry Roback, FCA, director at Privilege Accounts, a tax and accountancy specialist for freelancers, contractors and the self-employed.

Continue reading around the topics :

Comment

In the same category

Connecting tech talent

Free-Work, THE platform for all IT professionals.

Its contents and its IT job board are 100% free of charge for contractors and freelancers.

Free-workers
Resources
About
Recruiters area
2024 © Free-Work / AGSI SAS
Follow us

FreelanceUK has moved to Free-Work

We would like to welcome you to Free-Work, an international platform dedicated to supporting IT freelancers and contractors with their professional journeys in the tech industry.

FreelanceUK news, guides and resources, including the forum, have now moved to Free-Work, where we will continue to report on everything from tax issues and market demand to freelancing tips and technology trends. You can also search the latest IT contracts and freelance tech job opportunities on our jobs page.

💡 Good to know: Your forum profile remains the same. To login, nothing could be simpler, all you need to do is use your email linked to your FreelanceUK account and your password.

Enjoy your visit!

The Free-Work team