Losing out to UK..

G

gracey33

Guest
Hi

I am the owner of a furniture manufacturing company in ireland and we have recently tendered for a project against a UK firm for a contract in Dublin. The customer is VAT exempt (private school).

They are more than likely going to go with the UK firm as they will not have to pay VAT and are not in a position to claim back 13.5% VAT that we will charge.

My query is can i make any suggestions or proposals to them or am i sunk?

Grace
 
As a VAT exempt body they would will have to pay UK VAT. The UK supplier can only 0% rate the supply where they Irish body provides an Irish VAT number. Therefore, they will have to pay the UK VAT on the supply.
 
gracey33 said:
... The customer is VAT exempt (private school).

... and are not in a position to claim back 13.5% VAT that we will charge...
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That makes no sense. If they are VAT exempt, they supply you with a copy of their VAT exemption certificate, you quote this on your invoices and charge VAT at 0%.

or do you mean they are not VAT registered? If this is the case then the UK supplier charges 15% VAT or you charge whatever is appropriate.

Why do you specify a 13.5% VAT rate?
 
VAT exemption purely means that the services they provide are not liable to VAT. It does not mean that they are exempt from purchase VAT. Basically they cannot recover any VAT incurred as they are providing VAT exempt supplies.
 
We supply and fit furniture certain building services attract VAT @ 13.5%. If the goods are supply ony we charge 21.5%. Apolgies they are NOT Vat exempt but have no means to reclaim the VAT. So buying in England means they will not be charged VAT.
 
VAT is a very specialised area and I would not say that this is gospel but I'm nearly sure that they are VAT exempt (i.e. by providing educational services) and that is why they cannot register for VAT.

They will have to pay UK VAT unless the UK company decides incorrectly not to charge it. It's similar to a private individual buying something in the UK. The only way that UK VAT is not charged on a supply to Ireland is where an Irish VAT number is quoted.

If the contract is supply and fit the UK company will actually be required to charge Irish VAT as the supply is deemed to take place in Ireland.
 
BaileyMc said:
VAT exemption purely means that the services they provide are not liable to VAT. It does not mean that they are exempt from purchase VAT. Basically they cannot recover any VAT incurred as they are providing VAT exempt supplies.
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Slightly OT, but your understanding / explanation of a VAT exempt business is incorrect.

I worked a VAT exempt technology export business for a number of years. Our exemption certificate meant that local suppliers could sell to us legally excluding VAT. For suppliers outside national boundaries, the exemption certificate worked as a VAT registration certificate, which is what it was.

Sales VAT was dependant on the status / location of the organisation or individual.

It transpires that OP meant "unregistered for VAT" in any case.
 
Not to dwell on the point as it is irrelevant to the OP question but what was likely the situation with the company you worked for was they were providing VAT exempt services (as export) however would have been entitled to claim a deduction for Irish VAT incurred as this would be a qualifying activity with respect to VAT deductibility.

In order to save such companies the hassle and cash flow costs of continually submitting VAT3's for repayment of input VAT a simplification measure known as a 13A application can be made and when given to suppliers means no VAT is charged. The certificate you refer to is a VAT13B which is issued under where approval is granted.

This is different to the original posters query as the school is providing VAT exempt services with no entitlement to recovery as education is not a qualifying activity.

The school cannot register for VAT in this situation and is not a case of being unregistered, it is not entitled to register as an exempt supplier for VAT.

Hope that clears it up!
 
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Why not instead source from a manufacturer in Poland/China, the issue with vat is not the main issue, its the overall cost to the school by the look of things
 
That's exactly the point ccraig. The cost to the school includes the VAT.

If they were buying from Poland/China, wherever the same point applies.

Poland would work on the same basis as the UK. China would have the added extra of import duty on top of the VAT payale at point of import.

The OP is facing a problem that is very serious for Irish businesses. It is very difficult to compete with foreign businesses who decide not to implement the VAT legislation correctly when selling to private individuals/bodies who don't have full recoverability. For these customers VAT is an actual cost. Never mind the actual VAT rate differences, this is the difference between an additional 13.5/21% on the bill.

OP I am very surprised that the UK company are going this way as I have always found that they are quite strict about the whole VAT no. and production of some form of evidence (headed paper etc.). By any chance have they quoted for a supply and fit of the goods here in Ireland as you have? If so, this woud affect the things I said before, not greatly though.

Basically, if that is the case, it is actually Irish VAT that is payable on the supply. Confusing I know but the legislation deems the place of supply in these citcumstances to be Ireland. I would have to double check whether it is the school or the supplier that has to account for it, nearly sure it is the school. Either way one of them will have to pay the VAT to Revenue.

Might this explain the situation?
 
The UK company have quoted them for suppy only so no VAT applies?.
 
BaileyMc said:
The only way that UK VAT is not charged on a supply to Ireland is where an Irish VAT number is quoted.

The school have an Irish VAT No so then it is true. They can buy the furniture from England and have no VAT liablity. Hard to compete with that.......
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Okay so let me get this straight they have a VAT number but are not entitled to deduction of VAT?

On that basis they quote the Irish VAT number to the UK supplier and no UK VAT arises.

However, they must then self-account for the Irish VAT arising (as the place of supply is deemed to be Ireland on an intra-community acqusition of goods) at the relevant rate effectively giving rise to a VAT liability. If they have no deductibility (which makes sense on the basis that they are providing VAT exempt services) they cannot claim a corresponding deduction. So this is an absolute cost to the school.

That means that they will be paying Irish VAT on the supply and at the same rate as with you (on the basis of supply only). Basically solving the issue unless the UK company are cheaper for the underlying goods.

I hope that makes sense.
 
I don't see why a school would have a Vat number, unless at some point they had a one-off large purchase from abroad. Maybe they did, and are now under the impression they are Vat registered ?
 
I agree Gervan it doesn't make sense. The only thing I could figure was that they got some foreign consultancy services or something and then never cancelled the registration?

It would be hyper unusual for a school to be VAT registered.
 
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