Google, VAT and Sole Traders

J

Julian B

Guest
Apologies if this has been covered somewhere else, but I've tried searching and keep getting a blank page.

I'm a sole trader, running a small business from home part time and advertising through Google's adwords. I am not VAT registered as my income is WELL below the compulsory VAT limit.

Google has been pulled up recently on their VAT because their office is registered in Ireland and has been charging VAT at 21% (The rate in Ireland) since they started back in 2004.

I received an email from them before Xmas asking me to log in to my account and state if I was using my account for business purposes and to provide my VAT number if I had one. I did so, and left the VAT registration number empty because I don't have one.

I then received a cheque in Jan for the Irish VAT that I have paid over the last 3 years of trading and an instruction to pay VAT on the charges at UK rates.

As I said, I'm not VAT registered, and I don't want to be as in my line of business I can't afford to add VAT onto my prices (it'd make the business uncompetitive) and can't afford to the charges out of my own pocket, so I'm not sure how I CAN pay VAT on the charges?

Google are being completely unhelpful - standard answer is "you're using it for business purposes, we're not charging you VAT, you pay it".

What am I supposed to do?? How do I Pay VAT on their charges? Should I be paying VAT?

Julian
 
Julian B said:
As I said, I'm not VAT registered, and I don't want to be as in my line of business I can't afford to add VAT onto my prices (it'd make the business uncompetitive) and can't afford to the charges out of my own pocket, so I'm not sure how I CAN pay VAT on the charges?
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I don't understand - surely you can't unilaterally decide that you don't want to charge and remit VAT - you are either required to do so or not? Are you sure that your business can be VAT exempt? Do you have an accountant who can help/advise?
 
Hi ClubMan,

Thanks for your reply,

Under UK Tax law you're not required to be VAT registered until your business turns over more than about £60,000 a year. Under this VAT registration is optional.

However, I'm not exempt from VAT law - in the UK I believe I can either choose to register for VAT (in which case I have to charge VAT for my products unless my product falls into a classification which makes it VAT exempt, or unless the customer is VAT exempt and I can claim back VAT on anything I buy for the business), or I can choose not to register for VAT in which case when I buy goods, I pay VAT, but I don't charge VAT for my goods or services. However, I know it's a bit different when you start talking about goods or services purchased from abroad because you have to pay import excise or duty or VAT - this is about the extent of my knowledge on the subject though.

I'm obviously not an expert - which is why I'm asking the question :)

Julian
 
OK - I didn't realise that you were based in the UK. Note that Askaboutmoney is an Irish site. Sounds like you need to talk to an accountant. Bear in mind that you seem to be getting 21% Irish VAT back and if you have to pay/remit UK VAT then aren't the rates lower in which case you have a net saving?
 
Oops - sorry - I didn't realise this was an Irish site! Basically, yes if I pay UK VAT vs Irish VAT I will get 3.5% back, so this will work to my advantage, but not if I have to register for VAT for all my business activities (as I'll just end up paying something like 11% of my revenue straight back to the Tax man!)

Thanks for your help anyway - I'll bug my accountant a bit more.

Julian
 
Hi Julian, from memory of a slightly similar situation when I was in the UK (all my inputs were VAT exempt, so I was able to de-register), I believe what you should have done is say that you are not a business to Google as you are not claiming a business exemption for VAT. In that case, Google should just be sending you a cheque for the 3.5% difference on the VAT rate they over-charged you as an individual.

You will have to pay VAT on any purchases you make; as you are not VAT registered, you cannot claim it back, but you should be paying at UK rates (17.5%).
 
ClubMan said:
Are you sure that your business can be VAT exempt?
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The same regime of exemption from registration for low income business (below the mandatory registration threshold) exists in Ireland:
[broken link removed]
 
I wasn't questioning the existence of a VAT exemption regime. I was questioning the original poster's assumption that his/her business was VAT exempt.
 
ClubMan said:
I wasn't questioning the existence of a VAT exemption regime. I was questioning the original poster's assumption that his/her business was VAT exempt.
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The OP did say:
"I am not VAT registered as my income is WELL below the compulsory VAT limit."
 
There is a difference between 'VAT Exemption' and 'being below the VAT threshold'. I think this is what ClubMan is referring to?
 
If google (irish establishment) is supplying you with an advertising service and you are established in the UK and receive the service for business purposes, the charge by them to you is outside the scope of Irish VAT. You may be required to register and account for UK VAT on the reverse charge basis. Normally Google should require that you provide them with a UK VAT ID to do this. As you have not got one, it is difficult to see how the UK VAT authorities would ever know that you have to self account in the UK.
 
goldgrain said:
If google (irish establishment) is supplying you with an advertising service and you are established in the UK and receive the service for business purposes, the charge by them to you is outside the scope of Irish VAT. You may be required to register and account for UK VAT on the reverse charge basis. Normally Google should require that you provide them with a UK VAT ID to do this. As you have not got one, it is difficult to see how the UK VAT authorities would ever know that you have to self account in the UK.
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I don't agree. Google as an Irish-based company supplying goods or services to a customer within the EU, is obliged to charge VAT at Irish rates (21%) if their customer, Julian, fails to supply them with a valid EU VAT registration number or exemption certificate.

Julian has just had a nice little pressie from Google who will have to remit the original VAT they charged Julian to the Irish Revenue, if they haven't already done so.
 
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