VAT Recharge - The Book-keepers Forum (UK)

DBSC · Newbie

VAT Recharge

SarahT · Veteran Member

Is the company based in the UK or in Holland?

DBSC · Newbie

Hi Sarah,

Both of them are based in Holland.
I asked the F Manager and she said that all the office costs (mobile phones, paper etc.. ) are paid by the other company (I guess VAT is included on the third party invoices), and than they recharged the total amount to us. So..
Why I was a little bit confused is that the two company are subsidiaries of the same "parent" co. So it is an intercompany recharge. But it doesn't matter in VAT point of view. Does it?

The trickiest question is the salary recharge question. It is much more complex.. disbelief

I don't want to bore you with that. (only if you are interested in this issue)

Thanks

Zsuzsi

DBSC · Newbie

As I know the dutch regulations are similar than in the UK for this kind of recharges. so..
if somebody knows the UK rule, pls tell me:)

SarahT · Veteran Member

Hi Zsuzsi

Don't worry this isn't boring in the slightest, it's why I became a bookkeeper!

Based on UK rules I think the transactions would be classed as inter-company recharges, and in my opinion the company charging the cost to the other subsidiary would need to charge VAT at the relevant rate on the invoice. The other company receiving the invoice would need to pay the VAT plus the net cost of the recharge, but would also be able to reclaim the VAT as input VAT on their VAT return.

It doesn't matter what costs are recharged, VAT would need to be added. So for salaries recharged, although normally outside the scope of VAT, you would need to add VAT to the invoice and the other company would again reclaim the VAT on their VAT return. Whether you class the expense of salaries as salaries or subcontract would be an issue, I would say subcontract but this is a different issue.

DBSC · Newbie

Sarah,

thanks so much for your help!
About the salary recharges,
You said, that VAT is due, if let's say... a UK company charge salary costs to a UK company.

But the situation is much more complicated. hmm

We have an other company (a commissioner) and my "little company" is located in their office. (I mentioned that they use the commissioner's office equipment).

The commissioner, and other EU companies (eg. from Greece) supply staff to my company. They have contracts with the staff, and they pay their salary.
OK, it is clear, the commissioner charge local VAT, and we have to pay the gross amount. But the other companies charge through the commissioner. In practice: One invoice goes from Greece to the commissioner and one from the commissioner to my company. Normally it is a reverse charge transaction, but involving the commissioner, I am not really sure about it, because the second invoice will be "domestic" and cannot be reverse charge. Is it possible that after the commissioner received the invoice from Greece, will recharge it with VAT??

Sorry if my english is not understandable. I tried to do my best. smile

Thanks again for your help in advance

SarahT · Veteran Member

When an EU company in one state invoices a company in another EU state the transaction is not subject to VAT (as long as the VAT reg number is provided etc). Therefore the company based in Greece would not apply VAT to the invoice to the commissioner. The commissioner would then charge VAT on the invoice to your company which you could reclaim.