What if the Supplier has Charged UK VAT

VAT Question

Do I need to reverse charge VAT for any supply of services ((i.e., software from Apple, Microsoft, Adobe etc…) with no valid vat receipt (no GB vat number).

Is any supply of services (i.e., software from Apple, Microsoft, Adobe etc…)  to be accounted for at standard rate/ the rate shown with a valid vat receipt (showing a GB vat number and showing the vat element)?

VAT Answer

The simple answer is no. Your client has a requirement to make management charge for the services it provides to their associated business, but this charge must be made at a market value as the recipient business is a related party that is not able to recover all VAT charged to it (it is partly exempt). If the charge were not made at a market value then HMRC can, under provisions within the VAT Act, revalue the charge to market value and VAT would be due on that revalued amount.

Whilst there is no definition of market value, in practice HMRC would likely consider that the management charge must be for at least the cost to the consultancy company of supplying those services.

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