UK Business Advice to Pay Less Tax Elsewhere (It's Time!)

[mhmhmah]

Hi All,

I am involved in an online coaching business that provides a digital service to UK residents. Our last VAT bill was £80k and we are grossing about £200k per month which this figure aiming to grow to well over £500k in the next few years.

Where and what would you do to move this company oversees to essentially pay no VAT (as this a burn in our books right now) and reduce our corporation tax but VAT is the biggest issue for us right now.

Never delved into this subject before but want some basic advice on what you'd do and where you'd go. We have been looking at Spain and Dubai but are open to all options.

Thanks in advance

 

[Propeller]

Maybe use services like @MichaelUniq or @Gediminas You have to charge VAT to UK citizens if they are not B2B as I remember.

 

[mhmhmah]

Thanks for the quick reply! So regardless, if I am selling to UK customers, I simply have to pay VAT and there isn't a way around that?

 

[bibing]

By moving out the only thing you can lower is the corporate tax. VAT stay the same. Take note that VAT is something customers pay and you "transfer" to the government .

So if you price something you should do 100+VAT

 

[mhmhmah]

Thanks. Am I right to think that if I was selling to a UK business (another Ltd co) there would be no vat as it’s B2B not B2C?

VAT is something I can not pay due to it being a digital product?

I see digital products all the time that I purchase being in the UK that do not charge me VAT.

 

[bibing]

If it's a B2B transaction no VAT

B2C transactions needs to add a VAT.

- I see digital products all the time that I purchase being in the UK that do not charge me VAT.

Maybe you buy as a business, or more often I notice the price showed has already a VAT included (business is going to remove VAT after)

 

[mhmhmah]

Thanks for this. When you say business can that be a sole trader or does it need to be Ltd or similar? Why does B2B mean it’s exempt from Vat?

 

[Solidus]

Thought I’d add my two cents, for what it’s worth. This isn’t legal or financial advice, just general info based on what I’ve come across.


If you're selling digital services to people in the UK (especially consumers), VAT is going to apply regardless of where your company is registered. The key point is that VAT is based on where the customer is, not where the business is located.


Setting up abroad, like in Dubai or elsewhere, can help reduce corporation tax, but it won’t get you out of charging VAT on UK sales if you're dealing with UK-based individuals. You’d still need to register for UK VAT if you go over the threshold and your customers are here.


Selling B2B is a different story. If your client is a VAT-registered UK business and you have their VAT number, then in most cases you don’t charge VAT - they account for it using the reverse charge mechanism. But it has to be a proper business i.e limited liability, not just someone with a website calling themselves a sole trader.


On the point about buying digital stuff yourself and not being charged VAT - I’ve seen the same, but often the VAT is just included in the price and not broken out. Other times, the seller might not be applying VAT correctly, which technically isn’t compliant, but it does happen.


At the end of the day, if most of your customers are UK consumers, VAT is something you’re likely stuck with. You might be able to structure things more efficiently, but definitely worth speaking to someone who specialises in cross-border VAT and digital services.