As Brexit is all completely finished * * hollow laugh * * I look at what overseas businesses operating in the UK need to know in respect of compliance.
What is fiscal representation?
It is a safeguard for the authorities responsible for VAT in the EU (and UK). If it is not possible to collect tax from the taxable person, they can go to the representative who is usually jointly and severally responsible for the debt.
Each EU Member State has its own rules on representatives, but here I look at what overseas businesses need to do in the UK, and what the responsibilities are for a business acting in such a role. A representative must meet a set of tests to ensure that it is fit and proper in order for it to be allowed to act in a representative capacity.
In most cases, overseas businesses with no place of belonging in the UK register as a Non-Established Taxable Person (NETP).
Choices
If a business is a NETP, it will have a choice in how it registers and accounts for VAT in the UK (although in certain circumstances, HMRC have the power to direct a business appoint a tax representative).
Deal with UK VAT itself
In most cases an overseas business can deal with VAT without third party assistance. However, it must be able to:
- register for VAT at the correct time
- keep a record of everything it buys and sells in the UK
- keep all the records needed to complete its VAT Return
- produce records and accounts to HMRC for inspection
- keep a note of all VAT paid and charged for each period covered by the return
- pay the right amount of tax on time
Tax representative
A NETP may appoint a tax representative who:
- must keep its principal’s VAT records and accounts and account for UK VAT on its behalf
- is jointly and severally liable for any VAT debts the NETP incurs
A NETP is obliged to provide all of the information required to fulfil its obligations.
Tax Agent
A NETP may appoint a tax agent to act on its behalf. Such an arrangement will be subject to whatever contractual agreement the NETP and the agent decide. The significant difference to a tax representative is that HMRC cannot hold the agent responsible for any of the NETP’s VAT debts. This is clearly a better position for a UK business acting on behalf of a NETP. HMRC can decide not to deal with any particular agent appointed. Also, in some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed – this is usually in cases where there is a risk to the revenue. Additionally, HMRC can ask for a financial security.
As with the appointment of tax representatives a NETP:
- may only appoint one person at a time to act as its agent (although an agent may act for more than one principal)
- must still complete the appropriate form to apply for registration
- HMRC require a NETP’s authority before it can deal with an agent
- Needs to give the agent enough information to allow them to keep the VAT account, make returns and pay VAT
It is possible to appoint an employee to act as a VAT agent.
Penalties
As is to be expected, get any of the above wrong and there are penalties!