Many of our clients, especially in the eventing, show jumping, dressage and racing world, buy and sell horses as part of their trade.
The sale of horses is a taxable supply for VAT purposes with VAT chargeable at 20% (unless the second hand margin scheme applies) for transactions within the UK. However, many horses are bought from, or sold to, other countries including Germany, Ireland and the USA. VAT on sales or purchases from other countries is not as straight forward as UK only transactions, and accounting for the VAT also depends on whether it is a transaction within the EU or outside of the EU and whether the item is a good (such as a horse) or a service (such as international horse transport).
A summary of how to account for the VAT is as follows:
Outside the EU
• Imports – VAT paid (at the same rate as goods would be chargeable in the UK) on the value of the goods imported at the point of entry into the UK.
• Exports –zero rated (but need evidence of exporting such as contracts/invoices/freight confirmation).
Inside the EU
• Acquisitions (imports) – UK trader accounts for acquisition tax and input VAT. It is therefore VAT neutral.
• Dispatch (exports)
a. If the UK supplier knows the VAT number of the recipient – zero rated.
b. If the UK supplier doesn’t know the VAT number of the recipient – standard rated.
UK supplying to overseas
• If customer is VAT registered – not a taxable supply.
• If customer is not VAT registered – standard rated.
Overseas supplying to the UK
• UK VAT registered trader accounts for input VAT and output VAT (reverse charge system). It is therefore VAT neutral.
The transactions need reporting on the VAT return and may or may not need to be included in the EC Sales and EC Purchases box.
This is a complex area of VAT and Ellacotts can assist you with the reporting of your overseas transaction in your VAT returns together with other VAT matters.
Please contact Claire Rigby today if you would like to speak further on this matter.