VAT on web site development for US client

Question

I am a small business currently zero rated for VAT. My understanding is that I don’t charge VAT for software development for a US based client.
The question is do i have to include this sale in my flat rate turnover. If I do I will be paying 14% VAT , but receiving nothing fro the customer

Answer

Hi there,

Thank you for your question – I hope you find the answer you’re looking for.

In the meantime please do check out this HMRC video on trading outside of the EU.

http://opentoexport.com/article/video-tax-and-vat-issues-when-trading-with-countries-outside-the-eu/

Best wishes,

Will

Answer

Our Ref: Webinar 12

If you are providing software development to a business based in the US the supply is outside the scope of UK VAT if falling within the B2B (business to business) general rule for services described in section 5 of VAT Notice 741A – Place of supply of services. This includes the production of customised computer software and maintenance involving upgrades. (Please note that some ‘off-the-shelf’ software packages are treated as supplies of goods). (please see link below)

https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services

You exclude from your flat rate turnover any supplies outside the scope of UK VAT. Paragraph 6.3 of VAT Notice 733 – Flat Rate Scheme for small businesses refers. (please see link below)

https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses

HM Revenue & Customs
Customs International Trade & Excise
www.hmrc.gov.uk/contactus

Answer

Thanks for the comprehensive answer. We are definitely supplying customised software development , so it all look clear to me

Thanks again

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