VAT question

It would be zero rated , my last company used to send consumables to the States and Australia and they always claimed the VAT back from us as our system automatically used to add it on

Normally goods and services outside UK are not subject to VAT just need disclosure on VAT return separately

No it is nothing more complex that that assuming you will have proof of export (in this case, you will presumably e-mail the goods). Jonathon is right, zero rated is fine. This HMRC page, especially the Basics section, explains it fairly clearly http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000130&propertyType=document#P95_6411.

A quick point, probably not needed as you are likely to do this for your UK customers, and that is to supply low resolution, watermarked images for approval and only send the final ones once funds have been received and cleared. It isn't easy recovering a bad debt from an overseas customer.

Well done in breaking into the USA market.

Gary

Thank you all - only at quote stage at the moment so no assumptions made about it being a paying job, but wanting to at least know that I'm quoting the correct amounts!

Gary - yes, I'll be even more wary than normal about ensuring payment is made upfront/before usable files are supplied. Thank you for the reminder.

My view is your supply is one of design services with the digital files being the medium for conveying the designs to the customer. Therefore no VAT is due; however the supply is outside the scope of VAT rather than being zero rated. This is due to the fact that the supply is to a customer outside the EC.

There are more complex rules looking at use and enjoyment of electronic services but these apply where the service is generally reliant on the internet to deliver it and needs little human intervention to be provided. I doubt this would affect your supply.

One further thought, if you are contracting with or quoting for work with a customer who is outside the EC it is always worth adding  something along the lines of ' contract value£X (plus VAT if applicable)'. This should allow you to charge plus UK VAT, for example if your client decides to change the contract from being with their US business to a UK subsidiary, or if it turns out that their US business is UK VAT registered and using the services in the UK.     

Agreed with regards to it being outside the scope of VAT. I was going to suggest that earlier but when I double checked with HMRC they state that it should be zero rated, unless I have misread it. What I usually do is to set up a separate VAT code, with a zero rate, for non EU exports. In that way it is clearly identifiable.

Gary 

I agree with Gary that it is sensible to set up a seperate VAT code on a businesses accounting system to identify such supplies.

To be mega pedantic, the supply of design servcies to a customer outside the EC is outside the scope of VAT.

Zero rating is a VAT rate that applies to goods and services covered by the schedule 8 to VAT ACT 1994.

Goods that are exported are zero rate for VAT, but supplies of services classed as being made outside the UK which would apply to design services in the circumstances outlined above are not VAT able at either zero or standard rate.

The link provided to HMRC's website is for the export of goods not the supply of services.

All this may seem fairly trivial detail, but with supplies of services there are complex place of supply rules dependant on the nature of the supply  which can trap the unwary resulting in either an under or over payment of VAT.

Agreed. Once you step outside of the norm, it is horrendously complicated. I remember many years ago, when I ran a chocolate factory, we were hauled up on a VAT issue relating to bonus / free goods. If we gave vatable goods to a retailler for free e.g. a bonus, a buy one get one free type deal, then we would have to invoice the customer as Goods £0.00 and VAT £x.xx where x would be the amount of VAT that we would have charged the customer had he paid for them.

Gary

Is not that you would have to prove that the goods left the country before you can zero-rate a bill? I have seen that somewhere on the HMRC's website.

Daveyon

if you export goods outside the EC, or sell to a business customer in the EC and zero rate the supply you will need to have commercial evidence that the goods have left the UK in order to support zero rating the sale.  HMRC are very hot in this especially in the case of items that they percieve might be used an a 'carousel' fraud.

In addition sales of goods to non business customers to other EC countries that exceed certain threshold can trigger a liability to register and account for VAT in other EC countries.

VAT can be a real mindfield, if you or any forumites have a VAT query you are always welcome to call me at The VAT People. I dont make a charge for a brief piece of advice. 

I would only charge for more indepth advice if you require it and we have a fee agreement in place first.