Tax Consequences FINAL A/W 30/10/01 5:09 pm Page 1
VAT abroad Do I have to pay VAT on goods ordered from abroad? The VAT paid on imports depends on whether the transaction is inside or outside of the EU. If the company you are buying from is registered for VAT in an EU country, then you will need to pay the VAT in that particular country. However, you will not need to pay VAT when the goods enter the UK, as long as you can provide documentation to prove that the VAT has been paid in the country of origin. If the company you are buying from is outside the EU, then you will not have to pay any VAT up to a price limit of £18. For goods above this threshold, duty and VAT is then paid at point of entry. For VAT purposes the Channel Islands, Canary Islands and Gibraltar are outside of the EU therefore import duty and VAT would be charged on goods ordered from these countries.
Should I charge VAT on goods sold abroad? Again, this depends on whether or not the country you are supplying the goods to is in the EU. If the goods are being sold to a VAT registered company in the EU, then VAT should not be charged. If the company is not registered then you will need to charge VAT. It is not necessary to charge VAT if the company is outside the EU.
WHAT ARE THE TAX CONSEQUENCES OF TRADING ONLINE? Does it matter in what currency I deal with customers from overseas? If you are dealing with customers from overseas, you may wish to invoice, or you may be invoiced in, a different currency from the currency of your accounts. Invoicing, and receiving or making payments in currencies other than the currency of your accounts, including the Euro, may give rise to exchange differences. These will normally need to be recognised for tax purposes. It may be worth getting a professional accountant’s help to deal with any foreign exchange differences.
Infoline: 0845 715 2000 Web site: www.ukonlineforbusiness.gov.uk
For more information on trading online contact your local UK online for business adviser by calling the Infoline on 0845 715 2000 or visit the web site at
www.ukonlineforbusiness.gov.uk For specific tax advice contact your local tax office or visit the Inland Revenue’s web site at www.inlandrevenue.gov.uk For further information on duty, VAT and imports and exports call the National Advice Service on 0845 010 9000 or visit the HM Customs and Excise web site at www.hmce.gov.uk
Printed in the UK on recycled paper with a minimum HMSO score of 75. November 2001. Department of Trade and Industry. http://www.dti.gov.uk/ © Crown Copyright. URN 01/1369 RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk
Tax Consequences FINAL A/W 30/10/01 5:09 pm Page 1
VAT abroad Do I have to pay VAT on goods ordered from abroad? The VAT paid on imports depends on whether the transaction is inside or outside of the EU. If the company you are buying from is registered for VAT in an EU country, then you will need to pay the VAT in that particular country. However, you will not need to pay VAT when the goods enter the UK, as long as you can provide documentation to prove that the VAT has been paid in the country of origin. If the company you are buying from is outside the EU, then you will not have to pay any VAT up to a price limit of £18. For goods above this threshold, duty and VAT is then paid at point of entry. For VAT purposes the Channel Islands, Canary Islands and Gibraltar are outside of the EU therefore import duty and VAT would be charged on goods ordered from these countries.
Should I charge VAT on goods sold abroad? Again, this depends on whether or not the country you are supplying the goods to is in the EU. If the goods are being sold to a VAT registered company in the EU, then VAT should not be charged. If the company is not registered then you will need to charge VAT. It is not necessary to charge VAT if the company is outside the EU.
WHAT ARE THE TAX CONSEQUENCES OF TRADING ONLINE? Does it matter in what currency I deal with customers from overseas? If you are dealing with customers from overseas, you may wish to invoice, or you may be invoiced in, a different currency from the currency of your accounts. Invoicing, and receiving or making payments in currencies other than the currency of your accounts, including the Euro, may give rise to exchange differences. These will normally need to be recognised for tax purposes. It may be worth getting a professional accountant’s help to deal with any foreign exchange differences.
Infoline: 0845 715 2000 Web site: www.ukonlineforbusiness.gov.uk
For more information on trading online contact your local UK online for business adviser by calling the Infoline on 0845 715 2000 or visit the web site at
www.ukonlineforbusiness.gov.uk For specific tax advice contact your local tax office or visit the Inland Revenue’s web site at www.inlandrevenue.gov.uk For further information on duty, VAT and imports and exports call the National Advice Service on 0845 010 9000 or visit the HM Customs and Excise web site at www.hmce.gov.uk
Printed in the UK on recycled paper with a minimum HMSO score of 75. November 2001. Department of Trade and Industry. http://www.dti.gov.uk/ © Crown Copyright. URN 01/1369 RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk
Tax Consequences FINAL A/W 30/10/01 5:10 pm Page 4
What are the tax consequences of trading online? Many small businesses often find tax a somewhat ‘grey’ area. Once companies have come to grips with the tax implications of trading offline, the thought of the potential complexities of filling out tax forms for Internet trading can be daunting, to say the least. However, in reality, the tax consequences of trading online are similar to those in the offline world and, if anything, the Internet can make the whole process of dealing with tax much easier. The following points should provide answers to most of the basic queries that businesses have, whether they are setting up an e-business from scratch or expanding an existing business into the world of e-commerce.
If I am already trading, do I need to let the Inland Revenue know that I am now trading electronically? In general this will not be necessary as the electronic trading will be an extension of your existing trade. If, however, the electronic trading represents a wholly new venture or is substantially different from the activities of your existing business, you should contact the Inland Revenue with the details.
Keeping records
If I buy or sell electronically overseas, will I have to pay tax in those countries?
Do I need to keep special records of sales/purchases made electronically? All records which are required to make a correct and complete tax return must be kept. This specifically includes:
• all receipts and expenses that arise in the course of the business;
What special allowances can I claim for my Internet and e-commerce assets? If your business is small, you may claim 100% first year capital allowances on your investment in computer hardware, software and high-tech mobile phones, provided they are bought between 1 April 2000 and 31 March 2003. This means you can set the full cost of your investment against your taxable profits for the period of accounts during which the items are bought. Set-top boxes, which allow the Internet to be displayed through a television, can also qualify for the 100% first year capital allowances. Capital allowances give businesses tax relief for their investment in capital assets. They take the place of depreciation in the business’ accounts, which is not an allowable expense for tax purposes. Contact your local tax office for more information.
What tax relief is available if I lend my employees a computer? Neither you nor the employee will have any tax or national insurance contributions to pay on a computer of up to £2,500 in value which you lend to an employee, even for solely private use. However, the lending arrangements must not be confined to directors or made on more favourable terms to directors than to other employees.
RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk
• all sales and purchases, where the trade involves dealing in goods; and
• all supporting documents (bank statements, books,
Encryption
deeds, contracts, vouchers and receipts). ‘Documents’ includes records held on computer.
Can I use safe methods of storing information such as encryption? Can I keep electronic records? The Inland Revenue accepts methods which keep the information in the records in a different form, such as electronically. This is so long as those methods capture all the information needed to demonstrate that a complete and correct tax return has been made and they are capable of producing that information in legible form. This includes electronically scanned forms as long as the form represents an unaltered image of the underlying paper document However, there are occasions where the original record must be retained, such as documents issued by the Inland Revenue or those from a third party. The Pay As You Earn (PAYE) regulations do not provide for information to be kept in an electronic form. These documents do not have to be printed out, as long as original documents can be recovered from the electronic form and can satisfy the requirements for record keeping.
If you have encrypted the original records in any way, you must make sure that the original information can be recovered in an unencrypted form so that you can make a correct and complete tax return.
What if I change my computer or software? Businesses need to bear in mind that when they change or update computerised accounting packages, they need to ensure they have the software to access the old data.
What are the implications of trading electronically with people outside the UK? You should maintain records in exactly the same way as you do for transactions with people in the UK. If, however, you are setting up a trading structure overseas to administer this part of your business, there may by additional rules which you need to be aware of and you should contact your local tax office for more details.
FOR SPECIFIC TAX ADVICE CONTACT YOUR LOCAL TAX OFFICE OR VISIT THE INLAND REVENUE’S WEB SITE AT www.inlandrevenue.gov.uk
It is unlikely that simply buying or selling goods electronically through a web site on a server located in the UK to customers in another country will make you liable to corporation or income tax in that country. But if you carry out any other activities in that other country you may have a taxable presence there. Some countries may take the view that a server located in that country creates a taxable presence in that country. You are advised to contact the tax authorities in the country to clarify the position.
Is there any specific information that I should get from my international customers when trading electronically? You should keep sufficient information that will enable you to produce accounts and explain the transactions reflected in those accounts.
Are there differences that I need to be aware of between trading with other European countries and trading outside Europe? For corporation and income tax purposes, there are no significant differences.
Do I have to pay customs charges or duty on goods sourced from abroad? Duty must be paid on all items imported into the United Kingdom, including those bought via the Internet from countries outside the EU. The duty is paid when the goods enter the country. If the goods are couriered the duty can be paid by the courier company and then charged back to your business. If they are delivered directly through the postal system then you will have to pay the duty when the goods are delivered to your premises. Alcohol and tobacco purchased via the Internet from EU member states are both liable to duty.
FOR FURTHER INFORMATION ON DUTY, VAT AND IMPORTS AND EXPORTS, CONTACT HM CUSTOMS AND EXCISE ON 0845 010 9000
Tax Consequences FINAL A/W 30/10/01 5:10 pm Page 4
What are the tax consequences of trading online? Many small businesses often find tax a somewhat ‘grey’ area. Once companies have come to grips with the tax implications of trading offline, the thought of the potential complexities of filling out tax forms for Internet trading can be daunting, to say the least. However, in reality, the tax consequences of trading online are similar to those in the offline world and, if anything, the Internet can make the whole process of dealing with tax much easier. The following points should provide answers to most of the basic queries that businesses have, whether they are setting up an e-business from scratch or expanding an existing business into the world of e-commerce.
If I am already trading, do I need to let the Inland Revenue know that I am now trading electronically? In general this will not be necessary as the electronic trading will be an extension of your existing trade. If, however, the electronic trading represents a wholly new venture or is substantially different from the activities of your existing business, you should contact the Inland Revenue with the details.
Keeping records
If I buy or sell electronically overseas, will I have to pay tax in those countries?
Do I need to keep special records of sales/purchases made electronically? All records which are required to make a correct and complete tax return must be kept. This specifically includes:
• all receipts and expenses that arise in the course of the business;
What special allowances can I claim for my Internet and e-commerce assets? If your business is small, you may claim 100% first year capital allowances on your investment in computer hardware, software and high-tech mobile phones, provided they are bought between 1 April 2000 and 31 March 2003. This means you can set the full cost of your investment against your taxable profits for the period of accounts during which the items are bought. Set-top boxes, which allow the Internet to be displayed through a television, can also qualify for the 100% first year capital allowances. Capital allowances give businesses tax relief for their investment in capital assets. They take the place of depreciation in the business’ accounts, which is not an allowable expense for tax purposes. Contact your local tax office for more information.
What tax relief is available if I lend my employees a computer? Neither you nor the employee will have any tax or national insurance contributions to pay on a computer of up to £2,500 in value which you lend to an employee, even for solely private use. However, the lending arrangements must not be confined to directors or made on more favourable terms to directors than to other employees.
RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk
• all sales and purchases, where the trade involves dealing in goods; and
• all supporting documents (bank statements, books,
Encryption
deeds, contracts, vouchers and receipts). ‘Documents’ includes records held on computer.
Can I use safe methods of storing information such as encryption? Can I keep electronic records? The Inland Revenue accepts methods which keep the information in the records in a different form, such as electronically. This is so long as those methods capture all the information needed to demonstrate that a complete and correct tax return has been made and they are capable of producing that information in legible form. This includes electronically scanned forms as long as the form represents an unaltered image of the underlying paper document However, there are occasions where the original record must be retained, such as documents issued by the Inland Revenue or those from a third party. The Pay As You Earn (PAYE) regulations do not provide for information to be kept in an electronic form. These documents do not have to be printed out, as long as original documents can be recovered from the electronic form and can satisfy the requirements for record keeping.
If you have encrypted the original records in any way, you must make sure that the original information can be recovered in an unencrypted form so that you can make a correct and complete tax return.
What if I change my computer or software? Businesses need to bear in mind that when they change or update computerised accounting packages, they need to ensure they have the software to access the old data.
What are the implications of trading electronically with people outside the UK? You should maintain records in exactly the same way as you do for transactions with people in the UK. If, however, you are setting up a trading structure overseas to administer this part of your business, there may by additional rules which you need to be aware of and you should contact your local tax office for more details.
FOR SPECIFIC TAX ADVICE CONTACT YOUR LOCAL TAX OFFICE OR VISIT THE INLAND REVENUE’S WEB SITE AT www.inlandrevenue.gov.uk
It is unlikely that simply buying or selling goods electronically through a web site on a server located in the UK to customers in another country will make you liable to corporation or income tax in that country. But if you carry out any other activities in that other country you may have a taxable presence there. Some countries may take the view that a server located in that country creates a taxable presence in that country. You are advised to contact the tax authorities in the country to clarify the position.
Is there any specific information that I should get from my international customers when trading electronically? You should keep sufficient information that will enable you to produce accounts and explain the transactions reflected in those accounts.
Are there differences that I need to be aware of between trading with other European countries and trading outside Europe? For corporation and income tax purposes, there are no significant differences.
Do I have to pay customs charges or duty on goods sourced from abroad? Duty must be paid on all items imported into the United Kingdom, including those bought via the Internet from countries outside the EU. The duty is paid when the goods enter the country. If the goods are couriered the duty can be paid by the courier company and then charged back to your business. If they are delivered directly through the postal system then you will have to pay the duty when the goods are delivered to your premises. Alcohol and tobacco purchased via the Internet from EU member states are both liable to duty.
FOR FURTHER INFORMATION ON DUTY, VAT AND IMPORTS AND EXPORTS, CONTACT HM CUSTOMS AND EXCISE ON 0845 010 9000
Tax Consequences FINAL A/W 30/10/01 5:10 pm Page 4
What are the tax consequences of trading online? Many small businesses often find tax a somewhat ‘grey’ area. Once companies have come to grips with the tax implications of trading offline, the thought of the potential complexities of filling out tax forms for Internet trading can be daunting, to say the least. However, in reality, the tax consequences of trading online are similar to those in the offline world and, if anything, the Internet can make the whole process of dealing with tax much easier. The following points should provide answers to most of the basic queries that businesses have, whether they are setting up an e-business from scratch or expanding an existing business into the world of e-commerce.
If I am already trading, do I need to let the Inland Revenue know that I am now trading electronically? In general this will not be necessary as the electronic trading will be an extension of your existing trade. If, however, the electronic trading represents a wholly new venture or is substantially different from the activities of your existing business, you should contact the Inland Revenue with the details.
Keeping records
If I buy or sell electronically overseas, will I have to pay tax in those countries?
Do I need to keep special records of sales/purchases made electronically? All records which are required to make a correct and complete tax return must be kept. This specifically includes:
• all receipts and expenses that arise in the course of the business;
What special allowances can I claim for my Internet and e-commerce assets? If your business is small, you may claim 100% first year capital allowances on your investment in computer hardware, software and high-tech mobile phones, provided they are bought between 1 April 2000 and 31 March 2003. This means you can set the full cost of your investment against your taxable profits for the period of accounts during which the items are bought. Set-top boxes, which allow the Internet to be displayed through a television, can also qualify for the 100% first year capital allowances. Capital allowances give businesses tax relief for their investment in capital assets. They take the place of depreciation in the business’ accounts, which is not an allowable expense for tax purposes. Contact your local tax office for more information.
What tax relief is available if I lend my employees a computer? Neither you nor the employee will have any tax or national insurance contributions to pay on a computer of up to £2,500 in value which you lend to an employee, even for solely private use. However, the lending arrangements must not be confined to directors or made on more favourable terms to directors than to other employees.
RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk
• all sales and purchases, where the trade involves dealing in goods; and
• all supporting documents (bank statements, books,
Encryption
deeds, contracts, vouchers and receipts). ‘Documents’ includes records held on computer.
Can I use safe methods of storing information such as encryption? Can I keep electronic records? The Inland Revenue accepts methods which keep the information in the records in a different form, such as electronically. This is so long as those methods capture all the information needed to demonstrate that a complete and correct tax return has been made and they are capable of producing that information in legible form. This includes electronically scanned forms as long as the form represents an unaltered image of the underlying paper document However, there are occasions where the original record must be retained, such as documents issued by the Inland Revenue or those from a third party. The Pay As You Earn (PAYE) regulations do not provide for information to be kept in an electronic form. These documents do not have to be printed out, as long as original documents can be recovered from the electronic form and can satisfy the requirements for record keeping.
If you have encrypted the original records in any way, you must make sure that the original information can be recovered in an unencrypted form so that you can make a correct and complete tax return.
What if I change my computer or software? Businesses need to bear in mind that when they change or update computerised accounting packages, they need to ensure they have the software to access the old data.
What are the implications of trading electronically with people outside the UK? You should maintain records in exactly the same way as you do for transactions with people in the UK. If, however, you are setting up a trading structure overseas to administer this part of your business, there may by additional rules which you need to be aware of and you should contact your local tax office for more details.
FOR SPECIFIC TAX ADVICE CONTACT YOUR LOCAL TAX OFFICE OR VISIT THE INLAND REVENUE’S WEB SITE AT www.inlandrevenue.gov.uk
It is unlikely that simply buying or selling goods electronically through a web site on a server located in the UK to customers in another country will make you liable to corporation or income tax in that country. But if you carry out any other activities in that other country you may have a taxable presence there. Some countries may take the view that a server located in that country creates a taxable presence in that country. You are advised to contact the tax authorities in the country to clarify the position.
Is there any specific information that I should get from my international customers when trading electronically? You should keep sufficient information that will enable you to produce accounts and explain the transactions reflected in those accounts.
Are there differences that I need to be aware of between trading with other European countries and trading outside Europe? For corporation and income tax purposes, there are no significant differences.
Do I have to pay customs charges or duty on goods sourced from abroad? Duty must be paid on all items imported into the United Kingdom, including those bought via the Internet from countries outside the EU. The duty is paid when the goods enter the country. If the goods are couriered the duty can be paid by the courier company and then charged back to your business. If they are delivered directly through the postal system then you will have to pay the duty when the goods are delivered to your premises. Alcohol and tobacco purchased via the Internet from EU member states are both liable to duty.
FOR FURTHER INFORMATION ON DUTY, VAT AND IMPORTS AND EXPORTS, CONTACT HM CUSTOMS AND EXCISE ON 0845 010 9000
Tax Consequences FINAL A/W 30/10/01 5:09 pm Page 1
VAT abroad Do I have to pay VAT on goods ordered from abroad? The VAT paid on imports depends on whether the transaction is inside or outside of the EU. If the company you are buying from is registered for VAT in an EU country, then you will need to pay the VAT in that particular country. However, you will not need to pay VAT when the goods enter the UK, as long as you can provide documentation to prove that the VAT has been paid in the country of origin. If the company you are buying from is outside the EU, then you will not have to pay any VAT up to a price limit of £18. For goods above this threshold, duty and VAT is then paid at point of entry. For VAT purposes the Channel Islands, Canary Islands and Gibraltar are outside of the EU therefore import duty and VAT would be charged on goods ordered from these countries.
Should I charge VAT on goods sold abroad? Again, this depends on whether or not the country you are supplying the goods to is in the EU. If the goods are being sold to a VAT registered company in the EU, then VAT should not be charged. If the company is not registered then you will need to charge VAT. It is not necessary to charge VAT if the company is outside the EU.
WHAT ARE THE TAX CONSEQUENCES OF TRADING ONLINE? Does it matter in what currency I deal with customers from overseas? If you are dealing with customers from overseas, you may wish to invoice, or you may be invoiced in, a different currency from the currency of your accounts. Invoicing, and receiving or making payments in currencies other than the currency of your accounts, including the Euro, may give rise to exchange differences. These will normally need to be recognised for tax purposes. It may be worth getting a professional accountant’s help to deal with any foreign exchange differences.
Infoline: 0845 715 2000 Web site: www.ukonlineforbusiness.gov.uk
For more information on trading online contact your local UK online for business adviser by calling the Infoline on 0845 715 2000 or visit the web site at
www.ukonlineforbusiness.gov.uk For specific tax advice contact your local tax office or visit the Inland Revenue’s web site at www.inlandrevenue.gov.uk For further information on duty, VAT and imports and exports call the National Advice Service on 0845 010 9000 or visit the HM Customs and Excise web site at www.hmce.gov.uk
Printed in the UK on recycled paper with a minimum HMSO score of 75. November 2001. Department of Trade and Industry. http://www.dti.gov.uk/ © Crown Copyright. URN 01/1369 RING THE UK ONLINE FOR BUSINESS INFOLINE ON 0845 715 2000 OR VISIT THE WEB SITE AT www.ukonlineforbusiness.gov.uk