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VAT on UK purchases under the Irish CTW Scheme

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  • 14-09-2009 12:10pm
    #1
    Registered Users Posts: 31,076 ✭✭✭✭


    I have just had clarification from my accountants that when a bicycle is purchased by an Irish employer from a UK supplier under the CTW scheme, the employer must pay Irish VAT @ 21.5% regardless of whether UK VAT has been applied.

    The UK supplier should zero-rate the purchase so that VAT is not paid in both jurisdictions, but this may not always happen - some suppliers refuse to do this.

    Of course, if the UK supplier has charged Irish VAT (I think Wiggle do this but CRC and others don't) then there is no additional VAT to be paid in Ireland.

    In any case, the Irish VAT is not reclaimable by the employer, and falls within the €1000 limit for the (income) tax-free benefit.

    Perhaps this will help someone, just thought I'd pass it on.


Comments

  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    That is the correct technical analysis assuming your employer is VAT registered in Ireland (as should be the situation in most cases).

    If the employer is not registered for VAT in Ireland, the supplier should charge the UK rate unless, like Wiggle, the supplier is registered in Ireland, when again the Irish rate should be applied.

    In many cases, when ordering mail order cross-border, there is a section to put the Irish VAT number, if applicable, and this should trigger the zero-rating on the invoice


  • Closed Accounts Posts: 2,001 ✭✭✭scottreynolds


    Lumen wrote: »
    I have just had clarification from my accountants that when a bicycle is purchased by an Irish employer from a UK supplier under the CTW scheme, the employer must pay Irish VAT @ 21.5% regardless of whether UK VAT has been applied.

    Thats very strange as any normal business purchases from the UK that are zero rated (since its painful to claim VAT back) don't then nered to have Irish VAT Applied.


  • Registered Users Posts: 31,076 ✭✭✭✭Lumen


    Thats very strange as any normal business purchases from the UK that are zero rated (since its painful to claim VAT back) don't then nered to have Irish VAT Applied.

    The normal practice for things like computer equipment purchased intra-community is to count VAT in both the + and - bits (i.e. pay and reclaim at the same time) thus the effect is zero.

    Bikes (under the CTW scheme) come under a special class of things which are not VAT-reclaimable, so you have to pay the VAT but can't "reclaim" it. Apparently legal services are in the same category.

    It's something to do with preventing companies shopping between countries for the lowest VAT rate.


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    Thats very strange as any normal business purchases from the UK that are zero rated (since its painful to claim VAT back) don't then nered to have Irish VAT Applied.

    In these circumstances the Irish business should self-account for the (Irish) VAT on the import. Assuming they are not a partially exempt business, they can claim the VAT back in full on the same VAT return(assuming the expense is for the purpose of the business). Hence the VAT is accounted for as a "sale" and "purchase", netting down to nil.

    However, in the case of the bike to work schme, as the bike is not used for a business purpose (commuting is not classified as a business purpose under the VAT rules), the Irish business is unable to reclaim the VAT on the "purchase", but still has to account for VAT on the "sale" (or "self-supply")


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    Lumen wrote: »
    The normal practice for things like computer equipment purchased intra-community is to count VAT in both the + and - bits (i.e. pay and reclaim at the same time) thus the effect is zero.

    Bikes (under the CTW scheme) come under a special class of things which are not VAT-reclaimable, so you have to pay the VAT but can't "reclaim" it. Apparently legal services are in the same category.

    It's something to do with preventing companies shopping between countries for the lowest VAT rate.
    You got there before me:)

    In terms of the reasons for this treatment, it is designed to get standardisation of the VAT rules across the EU, to help counter potential fraud, and also avoid the risk of people purchasing items from outside the EU, where there may be no VAT without the "self-supply" rules. VAT rates, however, are set by individual governments.

    Ultimately VAT is (supposed to be) a tax on consumption, borne by the consumer, and there could be major distortions in trade between EU countries if everyone was allowed to order goods from other countries using the VAT rate of the supplier. The lowest allowable standard rate within the EU is 15%, currently available in the UK and, for example, Luxembourg (there are lower rates available, but for very limited goods and services).

    Although there remains limited opportunity to purchase items by mail order taking advantage of these low rates, the rules do require overseas retailers to register in Ireland if they sell more than a relatively small amount of goods in Ireland.

    Overall the rules are aimed at ensuiring Irish consumers normally pay the Irish VAT rate on items where they take delivery in Ireland (there is nothing to stop someone taking delivery of something in, say, the UK, to get the UK VAT rate though)


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  • Registered Users Posts: 3,216 ✭✭✭cojomo2


    what about if you have a ltd. company, and you order a bike from the UK, give your VAT no in order to get the VAT zero rate, but pay for the bike from your personal funds?


  • Registered Users Posts: 14,384 ✭✭✭✭ednwireland


    cojomo2 wrote: »
    what about if you have a ltd. company, and you order a bike from the UK, give your VAT no in order to get the VAT zero rate, but pay for the bike from your personal funds?

    i think thats called vat fraud and the revenue take a dim view on there next audit of your company as the company will have to account for the asset - the bike, unless i've completely misunderstood vat law
    (when i moved here i was offered someones vat nio. to buy building materials in the north - i declined the revenue got very tight on checking vat returns on building matls and the practice pretty much stopped i think some suppliers got sone for allowing it )


  • Moderators, Politics Moderators, Sports Moderators Posts: 24,269 Mod ✭✭✭✭Chips Lovell


    Yay! Friday fun thread.


  • Registered Users Posts: 6,236 ✭✭✭Idleater


    el tonto wrote: »
    Yay! Friday fun thread.

    Not until someone asks about how to use the company vat no. to get away without paying VAT on a helmet.


  • Registered Users Posts: 14,384 ✭✭✭✭ednwireland


    nereid wrote: »
    Not until someone asks about how to use the company vat no. to get away without paying VAT on a helmet.

    whilst jumping a red light


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  • Registered Users Posts: 3,216 ✭✭✭cojomo2


    i think thats called vat fraud and the revenue take a dim view on there next audit of your company as the company will have to account for the asset - the bike, unless i've completely misunderstood vat law
    (when i moved here i was offered someones vat nio. to buy building materials in the north - i declined the revenue got very tight on checking vat returns on building matls and the practice pretty much stopped i think some suppliers got sone for allowing it )


    Hmm,

    but even if Revenue were to audit a company, where would it show that their Vat no. was used for a UK purchase? There would be no record of it on any company accounts if the item was paid for from personal funds, or am I missing something?


  • Registered Users Posts: 6,236 ✭✭✭Idleater


    cojomo2 wrote: »
    , or am I missing something?

    I'm going to go with a yes on that. If you weren't, we'd all have VAT numbers for "companies" so that we could spend that 21% on nicer shinier carbon bits n bobs.


  • Registered Users Posts: 684 ✭✭✭Toblerone1978


    cojomo2 wrote: »
    Hmm,

    but even if Revenue were to audit a company, where would it show that their Vat no. was used for a UK purchase? There would be no record of it on any company accounts if the item was paid for from personal funds, or am I missing something?

    Probably not through a Revenue audit per se, although don't be surprised if that's the reason a Revenue audit is taken place. The UK supplier would provide their tax authorities with your VAT number via the intrastat and the Irish Revenue checks it against their records, whereby you are suppose to provide the exact same details via your intrastat returns. If there's a mis-match, Revenue eye brows would be raised and may initiate a Revenue audit.

    If this sounds too complicated, then don't do it!! If it doesn't sound complicated, then you'll know it's not a smart move. :D


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    cojomo2 wrote: »
    Hmm,

    but even if Revenue were to audit a company, where would it show that their Vat no. was used for a UK purchase? There would be no record of it on any company accounts if the item was paid for from personal funds, or am I missing something?
    It does not matter what the Revenue do on audit. What you are suggesting is tax fraud. I suspect a lot of people use company VAT numbers to try and get things for personal use delivered into Ireland VAT free - it's illegal. End of story.


  • Registered Users Posts: 31,076 ✭✭✭✭Lumen


    If you're going to go down for VAT fraud at least make it a proper billion euro carousel fraud.

    Getting bent over by the Revenue for a couple of hundred on a bike would just be embarrassing.


  • Registered Users Posts: 257 ✭✭dited


    Ever so slightly off-topic, but I was hoping to purchase from Canyon through the bike-to-work scheme (assuming some bigwig over in the States decides to finally sign off on it - five months and still waiting!) Will the same situation apply to paying VAT as you are indicating does in the case of UK retailers? Oh, and I don't suppose anyone knows offhand the difference between the applicable German/Irish rates?

    Thanks


  • Registered Users Posts: 14,384 ✭✭✭✭ednwireland


    Lumen wrote: »
    If you're going to go down for VAT fraud at least make it a proper billion euro carousel fraud.

    Getting bent over by the Revenue for a couple of hundred on a bike would just be embarrassing.

    +1 carousel fraud is the way to go(OH brother worked on breaking that ring in uk)
    thought they'd brought in rules to stop that now
    i think they got £138 million on the one i'm thinking of


  • Moderators, Sports Moderators Posts: 24,879 Mod ✭✭✭✭CramCycle


    Lumen wrote: »
    In any case, the Irish VAT is not reclaimable by the employer, and falls within the €1000 limit for the (income) tax-free benefit.

    Sorry to sound stupid but I didn't think they could claim the VAT back on it anyway as it's not company property. The tax benefit is that the price of the bike is taken out of your wages so you don't pay tax on that money (saving you anywhere between 0% and 41% and the benefit for the employer is that they pay less PRSI as the price of the bike is taken out of the wages before tax is calculated).


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    CramCycle wrote: »
    Sorry to sound stupid but I didn't think they could claim the VAT back on it anyway as it's not company property.

    Strictly it is company property, for a short period at least. The company buys the bike, and sells it to the employee, normally under the salary sacrifice arrangements. Without the BTW scheme, thie would then be a taxable benefit

    From a VAT perspective, although the company buys the bike, it does not intend using it in it's business, which is why it cannot reclaim the VAT


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    dited wrote: »
    Ever so slightly off-topic, but I was hoping to purchase from Canyon through the bike-to-work scheme (assuming some bigwig over in the States decides to finally sign off on it - five months and still waiting!) Will the same situation apply to paying VAT as you are indicating does in the case of UK retailers? Oh, and I don't suppose anyone knows offhand the difference between the applicable German/Irish rates?

    Thanks
    German VAT rate is 19%, but if your employer is VAT registered in Ireland, that is irrelevant (unless you are trying to work out the net price from the VAT inclusive price). Essentially the employer purchases it without the VAT, then applies Irish VAT, currently at 21%, to it.


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  • Registered Users Posts: 3,010 ✭✭✭velo.2010




  • Registered Users Posts: 2,508 ✭✭✭Lemag


    Beasty wrote: »
    German VAT rate is 19%, but if your employer is VAT registered in Ireland, that is irrelevant (unless you are trying to work out the net price from the VAT inclusive price). Essentially the employer purchases it without the VAT, then applies Irish VAT, currently at 21%, to it.

    How would the employer then pay this VAT to the Irish Revenue? Is there a specific mechanism in place or would they simply send a cheque?


  • Registered Users Posts: 31,076 ✭✭✭✭Lumen


    Lemag wrote: »
    How would the employer then pay this VAT to the Irish Revenue? Is there a specific mechanism in place or would they simply send a cheque?

    It gets included in the normal VAT return.


  • Registered Users Posts: 32,381 ✭✭✭✭rubadub


    Beasty wrote: »
    If the employer is not registered for VAT in Ireland, the supplier should charge the UK rate unless, like Wiggle, the supplier is registered in Ireland, when again the Irish rate should be applied.
    I was going to ask how CRC get away with it, but just checked and they are charging Irish VAT too. The threshold is €35,000 worth of business and I suspect CRC should have been doing it a long time ago. I just bought a light and the prices did seem odd, it was £8.23 for Ireland but £7.99 when you pick the country as UK.

    At least there is no "paddy tax" going on. A sports supplement site myprotein in the UK went over the threshold recently and made a separate section in the site with pricing in euros -which now charges far more. CRC and amazon do it the proper way, you can still buy sterling with only the VAT difference -while some other places charge a lot more and hide it behind exchange rates or different sites.


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    rubadub wrote: »
    I was going to ask how CRC get away with it, but just checked and they are charging Irish VAT too.

    They only started charging Irish VAT around July. Slane still charge UK VAT (particularly beneficial on helmets, as they are zero-rated, although I tend to find their prices quite a bit cheaper than Wiggle and CRC on a lot of items)


  • Registered Users Posts: 2,508 ✭✭✭Lemag


    I've started a thread on the VAT issue with buying a bike from abroad here on the 'Taxation' forum and, from what I can gather, whilst the answer given seems to be effectively the same as described above it isn't technically the same.


  • Registered Users Posts: 31,076 ✭✭✭✭Lumen


    Lemag wrote: »
    I've started a thread on the VAT issue with buying a bike from abroad here on the 'Taxation' forum

    I find your lack of faith disturbing. :pac:


  • Administrators, Social & Fun Moderators, Sports Moderators Posts: 76,290 Admin ✭✭✭✭✭Beasty


    Lemag wrote: »
    it isn't technically the same.
    In what way? I know I try and keep my technical answers here simple (to suit the audience;)), but I don't think anything I (or indeed Lumen) have said contradicts the responses in the Taxation Forum


  • Registered Users Posts: 2,508 ✭✭✭Lemag


    Lumen wrote: »
    I find your lack of faith disturbing. :pac:
    No offense was intended oh mighty omniscient one :o It was a thread which I'd started before "contributing" towards this one and was only seeking further clarification/perspective.
    Beasty wrote: »
    In what way? I know I try and keep my technical answers here simple (to suit the audience;)),
    :)
    Beasty wrote: »
    but I don't think anything I (or indeed Lumen) have said contradicts the responses in the Taxation Forum
    Point 2 of this post states
    The Irish business then charges itself Irish VAT on import and doesn't claim a credit for the same VAT
    which =
    Beasty wrote: »
    Essentially the employer purchases it without the VAT, then applies Irish VAT, currently at 21%, to it.
    My bad. It just seemed a little clearer to me the way nompere put it in the Taxation forum. Don't know why really. Probably because I paid more attention to it. It being a response to my thread after all.


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