There was a time when being a multinational meant big business. Not anymore.?The growth of the internet ? along with cheaper air travel ? has made the world a smaller place and as a result a growing number of UK small businesses have built, or are preparing to build, a presence throughout Europe. According to the 2011 HSBC Global Small Business Confidence Monitor one in four (20 per cent) of small businesses in the UK are currently trading internationally and 40 per cent of small businesses worldwide will be operating internationally by 2013.? However, UK businesses with an EC Member State must understand and adhere to EU VAT handling legislation.? Here are some tips for business owners considering buying or selling goods within the EC Single Market.?
Get your head around the VAT terminology Goods that are brought in the UK from any EC Member State are referred to as “acquisitions” or “arrivals”. The term “import” is used for goods coming into the UK from countries outside the EC. Goods that are shipped out of the UK to EC Member States are known as “despatches” or “removals”. The term “export” is used for goods that leave the UK and go to countries outside the EC.
Know your VAT territory The VAT territory of the EC Single Market comprises of 25 member states which are listed in notice 725 under section 2.4 on the HRMC website. The country you are acquiring goods from, or despatching goods to, is extremely important from a VAT reporting perspective. Transactions occurring within the Single Market are regarded as intra EEC supplies, whereas supplies outside this area are treated as imported/exported goods for VAT purposes.
Get your books in order Key to compliance is possession of a good financial management system that can cope with the many variations onthe VAT theme. There are always exceptions to the basic rules such asaccounting for services rather than goods which leads you down other VAT paths.
Ask for help Always remember the VAT Office helpline is there to lend a hand so when you get stuck, or if an exception arises, don?t be afraid to contact them and ask how to handle specific entries. Details can be found at HRMC. Antony Stemp runs Independent Business Accounting
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