Hi all,

just wondering whether everyone else who rents out their house in the UK and has filed a NRL1 form still has to pay VAT on the management fees?

does the same apply to maintenance call out changes too?

My assumption would be that i dont.

thanks,.

VAT is usually regulated on the place of supply. Your property is in the UK, therefore the place of supply is the UK therefore there is no cross-border transaction. Would you ask for the VAT to be deducted from a hotel stay in Italy just because you're a CH resident?

If i could get away with it, hell yeah!

I guess i'm thinking along the same lines as retail where i can buy goods from Germany and not pay the VAT.

UK professional services related to real property located in the UK are subject to VAT. Otherwise they are generally not subject to VAT if the client is resident outside the EU.

But the rules on "place of supply" are complex and confusing: http://www.hmrc.gov.uk/vat/managing/...s/services.htm

And for transport services, they are unreasonably so: first the supplier has to determine whether it is a B2B (a commercial client) or a retail customer. For the latter, VAT is applied to the EU portion of services on a mileage basis. But because this is so unreasonable HMRC has temporarily suspended implementation of that EU Directive. http://www.hmrc.gov.uk/briefs/vat/brief1310.htm

Well, yeah, but sadly I don't think you can...

That is correct.
However in Switzerland; my Swiss lawyer said that if I was resident in the Uk (i.e. not Switzerland) he could invoice me for his services excluding Swiss VAT so I can see your point.

Unless I am very mistaken which I might be, but I would be surprised, then your lawyer would be breaching Article 8 paragraph 2 section c of the VAT Law (MehrwertSteuerGesetz (MwStG))

which when translated states that the work will be taxed according to the location where the work is performed. So if he performs the work in Switzerland then he would need to charge with Swiss VAT included.

I was surprised myself but he actually invoiced me without VAT at first thinking I was resident in the UK.

Doesn't mean he is right though! It is conceivable, but I am pretty sure not the case, that legal services are especially exempt.

From my best memory, only health related services are exempt along with a few difficult to imagine specials and all other "dienstleistung" ie services are VATable at the location where the service is actually performed. As the VAT is the only service that gets my knickers in a twist I regularly reread their regulations to make sure I do not fall foul. You do get the opportunity to declare an error later but that only raises the finger of suspicion, so best to get it right first time.

Also note that the VAT law changes on a frequent basis. The latest one is from June 2009 so maybe your first bill was before then. I don't actually think that the service part has changed in the last five years though...

Spot on ... the correct answer

Legal services are exempt -- except in relation to UK land -- when performed for a nonresident.

Anyway, see "Examples of land-related services" at
http://customs.hmrc.gov.uk/channelsP...yType=document

Many years ago I set up my own management company to manage UK properties we own. You can do that, hire your own personnel, stay below the VAT threshold, and provide pensionable employment to members of your family resident in the UK. That's one workaround. I have decades-old correspondence with the Inland Revenue (as it then was) approving this arrangement.

Hi Andy,
Are you here talking about a UK Lawyer performing the service or a Swiss one. I cannot find where Swiss legal services are exempt anywhere and I have read the VAT law twice now, and will now read the long version when I go to bed...

R.

UK lawyer, EC VAT directives. I have no information on Swiss VAT law (haven't ever had occasion to research the issue) but in principle (and I write on tax theory and do not have an active tax practice) a service can be exported, and so zero-rated, just as easily as a product. But legislatures tie themselves in knots, as we've seen, in defining export and place of performance.

It's obvious that imposing VAT on exported services disadvantages the professionals of your own country.

The issue of value-added taxation of goods and services imported by wire has been with us a long time: electricity sent from Quebec to the USA is subject to customs clearance. The Internet has made the issue more important, and the tax easily evaded (think of the "use taxes" in lieu of sales taxes in the USA). But VAT-registered importers are supposed to self-declare, and they can take a credit for the input tax, if applicable, on output VAT.

VAT is zero-rated for exports (and in relevant EU countries on sales to NATO forces and non-appropriated funds, but not individual soldiers). There may be other zero-rating and exemptions (exemption does not give rise to a refund of input VAT).

Diplomats (and with specific exemption for high-value furniture, embassies -- evidently a protectionist measure by the UK Government) are not exempt from VAT except on direct imports from abroad. This is a matter of dispute between the USA and the UK, among other countries. I interviewed an retired UK Ambassador who had been a junior participant at the Vienna Convention and who averred that back then the UK believed VAT to be a direct tax, as the USA argues today. But EU policy is that VAT is an indirect tax and so diplomats are not exempt. The USA retaliates by refusing to exempt Washington diplomats of EU countries from sales tax (diplomats of those countries accredited to the UN in New York are exempt). (That's the situation as of when I looked at it years ago; anyone interested can probably find current info on the State Dept. Web site.)

How services are subject to VAT has but little connection with place of performance; after all an importer of services may have to declare and pay VAT on services supplied from abroad. "Place of supply" is not always obvious; it's a matter of HMRC regulation that most legal services in connection with a particular piece of UK land are subject to VAT. On the other hand, a feasibility study by a law firm on behalf of a foreign group interested in investing in UK property probably would not be subject to VAT. http://www.hmrc.gov.uk/vat/managing/...s/services.htm A Russian acquaintance who hired a London immigration law firm to assist (successfully as it turned out) in the appeal of a residence visa denial avoided having to pay VAT because the law firm was retained by his Russian employer. That the employee himself was nonresident seemed not helpful in avoiding VAT, or at least the law firm was insecure about a potential audit.

Thanks Andy. Its an interesting debate and probably too complex for me to argue as its not huge sums of money but I'm sure someone who's renting a property for 4K a month and paying 20% management would want to delve into the finer detail more.