It appears that the enquiry is from 2013 regarding the VAT liability of Bitcoin, and at that time, the representative from HMRC was unable to provide specific advice due to ongoing discussions within the Policy group. They promised to offer a proper response once more information became available.
For any further questions, you were encouraged to resubmit your enquiry through HMRC’s website, using the case reference provided in the initial correspondence. The advice was to follow the links on the VAT "Contact us" page on their website.
Topic: Response from UK HMRC VAT Written Enquiries Officer (Read 5093 times)
So, you have (at least) the following principles:
Business-to-business (B2B) sale and both seller and buyer have VAT number of the Member State in which they are established: the place of taxation is determined by where the intra-Community acquisition of goods is made (i.e. the Member State where the goods are finally located after transportation from another Member State).
Businesses selling to non-taxable legal person, small enterprise, VAT exempt entity: normally, VAT of the Member State of origin of the goods, unless a threshold per customer has been reached: then it's VAT of the Member State of final destination of the goods.
Businesses engaging in long-distance selling to individuals and/or to non-taxable legal persons, small enterprises, VAT exempt entities (i.e. threshold for those transactions has been reached): VAT of the Member State of final destination of the goods. Not engaged in long-distance selling (i.e. threshold not reached): VAT of the country of the seller.
So, are you sure that KNCminer sells for more than 70,000 GBP into the UK to non-registered customers? Because the threshold has to be checked on a per-country basis and is also different for each country. Actually, I think only they can know for sure.
Conclusion: billing address is not relevant for VAT purposes.
Business-to-business (B2B) sale and both seller and buyer have VAT number of the Member State in which they are established: the place of taxation is determined by where the intra-Community acquisition of goods is made (i.e. the Member State where the goods are finally located after transportation from another Member State).
Businesses selling to non-taxable legal person, small enterprise, VAT exempt entity: normally, VAT of the Member State of origin of the goods, unless a threshold per customer has been reached: then it's VAT of the Member State of final destination of the goods.
Businesses engaging in long-distance selling to individuals and/or to non-taxable legal persons, small enterprises, VAT exempt entities (i.e. threshold for those transactions has been reached): VAT of the Member State of final destination of the goods. Not engaged in long-distance selling (i.e. threshold not reached): VAT of the country of the seller.
So, are you sure that KNCminer sells for more than 70,000 GBP into the UK to non-registered customers? Because the threshold has to be checked on a per-country basis and is also different for each country. Actually, I think only they can know for sure.
Conclusion: billing address is not relevant for VAT purposes.
But for now, let's also look at the seller: distance selling or not, or is he maybe a small trader himself (who does not need to charge VAT)?
The seller is KNCminer.com = Swedish VAT registered company and I'm quite sure their distance sales account for more than £70K in the current calendar year, thus they would have to register for UK VAT and account their sales here.
Just for the records:
Distance Selling: When only the seller is VAT registered
Dispatches: When both seller and buyer are VAT registered
This applies when seller and buyer are in different EU countries.
Btw in this case is VAT rate based on shipping or billing address?
If for example I purchase goods from a company in France to be delivered to the UK, but paid from a bank account in Italty then which country VAT rate is used?
Thank you again for your time
The text you posted is indeed confusing...
But here's what I could find:
The non-taxable legal persons mentioned in the excerpt you posted are "public bodies, organisations, institutions, charities and even individuals if they are not acting in a purely personal capacity" http://www.hmrc.gov.uk/manuals/vatsmanual/vatsm3600.htm . Think charities, public bodies, state schools and hospitals, etc. But not individuals as such.
These entities (a normal business, incorporated or otherwise, will not qualify) will normally be charged domestic VAT in the Member State from which the goods are dispatched, unless in the specific case of "distance selling".
This means that a non-taxable person may acquire goods from other Member States which are subject to VAT in that other Member State up to the value of GBP 77,000 in one calendar year (with effect from 1 April 2012). When this threshold is exceeded, the non-taxable person must register for VAT in the United Kingdom and account for tax on the goods in the United Kingdom as an acquisition.
The same rules should apply to acquiring small enterprises that are below the registration threshold - found many sources from other Member States confirming this, tomorrow I'll try to find a specific confirmation for the UK.
But for now, let's also look at the seller: distance selling or not, or is he maybe a small trader himself (who does not need to charge VAT)?
But here's what I could find:
The non-taxable legal persons mentioned in the excerpt you posted are "public bodies, organisations, institutions, charities and even individuals if they are not acting in a purely personal capacity" http://www.hmrc.gov.uk/manuals/vatsmanual/vatsm3600.htm . Think charities, public bodies, state schools and hospitals, etc. But not individuals as such.
These entities (a normal business, incorporated or otherwise, will not qualify) will normally be charged domestic VAT in the Member State from which the goods are dispatched, unless in the specific case of "distance selling".
This means that a non-taxable person may acquire goods from other Member States which are subject to VAT in that other Member State up to the value of GBP 77,000 in one calendar year (with effect from 1 April 2012). When this threshold is exceeded, the non-taxable person must register for VAT in the United Kingdom and account for tax on the goods in the United Kingdom as an acquisition.
The same rules should apply to acquiring small enterprises that are below the registration threshold - found many sources from other Member States confirming this, tomorrow I'll try to find a specific confirmation for the UK.
But for now, let's also look at the seller: distance selling or not, or is he maybe a small trader himself (who does not need to charge VAT)?
Supplier in the EU.
I'll get back to you on that - in the meantime, are you buying the ASIC from a supplier somewhere in the EU or from a supplier outside of the EU?
You seem like a person, who can successfully analyze and understand legal information, so can you help me clarify this statement from here:
The bolded text and specifically the one in red is a bit unclear to me - Does it state that if you are not VAT registered (non-taxable) legal person and your turnover is below a certain limit then you should not pay VAT (not subjected to VAT)?
Quote
Intra-Community acquisition of goods
The place of taxation is determined by where the intra-Community acquisition of goods is made (i.e. the Member State where the goods are finally located after transportation from another Member State).
Goods acquired by a taxable person acting as such (a business in its business capacity) or by a non-taxable legal person (for example a public authority) are subject to VAT. For simplification reasons, goods acquired by a taxable person covered by the SME scheme or the flat-rate scheme for farmers or by a non-taxable legal person are not subjected to VAT if annual acquisitions are below an annual turnover thresholdpdf(14 Kb) set by their Member State (minimum EUR 10 000), though it is still possible to opt for taxation.
The acquisition of goods is taxed in the MemberState issuing the VAT number (Member State of identification) under which the acquisition is made. Should the goods be transported to another Member State (Member State of arrival) tax must be paid there. This will be followed by an adjustment of the VAT paid in the Member State of registration. Examples of the two situations are as follows:
taxation in the Member State of identification [Article 41 of the VAT Directive]
Example 15: French VAT must be paid on goods acquired from another Member State by a company under its French number for use at its factory in Strasbourg.
Example 16: Where a company acquiring goods from Spain provides its supplier with the VAT number under which it is identified in Slovakia, VAT must be paid on the acquisition in Slovakia.
taxation in the Member State of arrival of the goods [Article 40 of the VAT Directive]
Example 17: If goods acquired by a company using its Slovakian VAT number are in fact sent from Spain to Germany, VAT must be paid on the acquisition in Germany and any tax due in Slovakia (see above example 16) will be reduced accordingly.
The place of taxation is determined by where the intra-Community acquisition of goods is made (i.e. the Member State where the goods are finally located after transportation from another Member State).
Goods acquired by a taxable person acting as such (a business in its business capacity) or by a non-taxable legal person (for example a public authority) are subject to VAT. For simplification reasons, goods acquired by a taxable person covered by the SME scheme or the flat-rate scheme for farmers or by a non-taxable legal person are not subjected to VAT if annual acquisitions are below an annual turnover thresholdpdf(14 Kb) set by their Member State (minimum EUR 10 000), though it is still possible to opt for taxation.
The acquisition of goods is taxed in the MemberState issuing the VAT number (Member State of identification) under which the acquisition is made. Should the goods be transported to another Member State (Member State of arrival) tax must be paid there. This will be followed by an adjustment of the VAT paid in the Member State of registration. Examples of the two situations are as follows:
taxation in the Member State of identification [Article 41 of the VAT Directive]
Example 15: French VAT must be paid on goods acquired from another Member State by a company under its French number for use at its factory in Strasbourg.
Example 16: Where a company acquiring goods from Spain provides its supplier with the VAT number under which it is identified in Slovakia, VAT must be paid on the acquisition in Slovakia.
taxation in the Member State of arrival of the goods [Article 40 of the VAT Directive]
Example 17: If goods acquired by a company using its Slovakian VAT number are in fact sent from Spain to Germany, VAT must be paid on the acquisition in Germany and any tax due in Slovakia (see above example 16) will be reduced accordingly.
The bolded text and specifically the one in red is a bit unclear to me - Does it state that if you are not VAT registered (non-taxable) legal person and your turnover is below a certain limit then you should not pay VAT (not subjected to VAT)?
I sympathise with what you are trying to achieve here, i.e. having your cake (no VAT on selling bitcoins) and eating it too (recovering VAT on mining equipment) - BTW I am not an Englishman so I am allowed to use stale expressions ;-)
But it is not that simple - the general rule remains that you cannot recover input VAT that relates to exempt output. Here, you are buying an ASIC, an "Application-Specific Integrated Circuit" that can only be used for making an exempt transaction, i.e. selling bitcoins.
Basically put, you only have a shot at recovering the VAT on the ASIC if your selling bitcoins is only marginal compared to your other, non-exempt, activities (i.e. you have a lot of input VAT you can recover). See the "de minimis rule" http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_CL_000857#P42_4728 .
The non-exempt activities could be anything: consulting, transaction fees, etc etc. If you have another business that is registered for VAT and not exempt, you could also try to meet the thresholds together as a VAT group.
You should check all of the above with a good UK accountant or tax specialist but if the VAT system in the UK works more or less like it does in the rest of the EU, here's your answer.
But it is not that simple - the general rule remains that you cannot recover input VAT that relates to exempt output. Here, you are buying an ASIC, an "Application-Specific Integrated Circuit" that can only be used for making an exempt transaction, i.e. selling bitcoins.
Basically put, you only have a shot at recovering the VAT on the ASIC if your selling bitcoins is only marginal compared to your other, non-exempt, activities (i.e. you have a lot of input VAT you can recover). See the "de minimis rule" http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_CL_000857#P42_4728 .
The non-exempt activities could be anything: consulting, transaction fees, etc etc. If you have another business that is registered for VAT and not exempt, you could also try to meet the thresholds together as a VAT group.
You should check all of the above with a good UK accountant or tax specialist but if the VAT system in the UK works more or less like it does in the rest of the EU, here's your answer.
I agree with, because after I posted my comment I researched more and came to the same conclusion as you
So the only way to reclaim VAT on mining equipment is against goods and services sold, which are VAT rated (zero, 5% or 20%)
I wonder what these might be?
So the only way to reclaim VAT on mining equipment is against goods and services sold, which are VAT rated (zero, 5% or 20%)
I wonder what these might be?
Sorry but I respectfully disagree.
There's a difference between zero-rated items and exempt items.
Good explanation here : http://happyaccountant.wordpress.com/2010/08/26/the-difference-between-zero-rated-vat-vat-exempt-out-of-scope-of-vat/
There's a limited list of zero-rated items and bitcoin is not on it. Bitcoins are however, VAT exempt as argued here, under the "payment services" exception https://bitcointalksearch.org/topic/vat-buying-btc-in-sweden-or-poland-259045 .
The unfortunate consequence is that "suppliers of Exempt goods cannot reclaim the input VAT (the VAT on their own purchases) relating to Exempt Supplies" -> so that would mean no VAT recovery on ASIC equipment.
There's a difference between zero-rated items and exempt items.
Good explanation here : http://happyaccountant.wordpress.com/2010/08/26/the-difference-between-zero-rated-vat-vat-exempt-out-of-scope-of-vat/
There's a limited list of zero-rated items and bitcoin is not on it. Bitcoins are however, VAT exempt as argued here, under the "payment services" exception https://bitcointalksearch.org/topic/vat-buying-btc-in-sweden-or-poland-259045 .
The unfortunate consequence is that "suppliers of Exempt goods cannot reclaim the input VAT (the VAT on their own purchases) relating to Exempt Supplies" -> so that would mean no VAT recovery on ASIC equipment.
I was too researching into the legal implications of VAT in regards to buying expensive mining equipment and selling the produce (bitcoins of course).
According to HMRC you can voluntary register for VAT in cases where it would benefit your business such as:
I believe the first scenario is exactly the case here: you buy expensive ASIC equipment to produce and sell bitcoins, which are zero-rated, thus you can reclaim all the VAT paid on the equipment.
Correct me if I'm wrong.
According to HMRC you can voluntary register for VAT in cases where it would benefit your business such as:
There are potential cashflow advantages of being able to charge VAT on your sales and claim back VAT on your purchases, which you may benefit from depending on your circumstances. For example:
if you sell zero-rated items and buy standard-rated items you would receive a VAT refund from HMRC
if you have not yet sold anything or don't sell anything during a VAT accounting period, you may still be able to claim VAT back on your purchases
if you sell zero-rated items and buy standard-rated items you would receive a VAT refund from HMRC
if you have not yet sold anything or don't sell anything during a VAT accounting period, you may still be able to claim VAT back on your purchases
I believe the first scenario is exactly the case here: you buy expensive ASIC equipment to produce and sell bitcoins, which are zero-rated, thus you can reclaim all the VAT paid on the equipment.
Correct me if I'm wrong.
Profit rather than revenue? As far as I was aware the HMRC rules apply to turnover (as in throughput), not profit. For 2013-2014 this is 79,000 GBP.
Hence, non VATable. Good call HMRC.
Credit vouchers are not fully tax exempt. If you are buying and re-selling VAT is still due on the profit made from resale. Exchanging BTC for sterling is more complicated because technically you are redeeming the voucher and may be liable for VAT on the full face value.
The plus side for selling coins is you don't need to register for VAT until your profit exceeds £79k, rather than revenue. Although the site is no longer selling coins Blockchain paid approximately £40k in VAT this year.
Quote
Face value vouchers
Face value vouchers have a monetary face value. These are used instead of money for a future purchase. If you sell them at or below their monetary value, no VAT is due.
When a customer redeems a face value voucher, the transaction is treated as though the face value voucher was cash, and VAT is due on the full value of the transaction. If you can show the voucher had been sold at a discounted amount, VAT is due on the discounted value, rather than the face value of the voucher.
If you give away face value vouchers and redeem them for no further payment, the goods purchased are usually treated as if they were free gifts for VAT purposes.
http://www.hmrc.gov.uk/vat/managing/charging/discounts-etc.htm#4Face value vouchers have a monetary face value. These are used instead of money for a future purchase. If you sell them at or below their monetary value, no VAT is due.
When a customer redeems a face value voucher, the transaction is treated as though the face value voucher was cash, and VAT is due on the full value of the transaction. If you can show the voucher had been sold at a discounted amount, VAT is due on the discounted value, rather than the face value of the voucher.
If you give away face value vouchers and redeem them for no further payment, the goods purchased are usually treated as if they were free gifts for VAT purposes.
It makes sense. Effectively they're saying its a ticket you can redeem for a Fiat price, which is correct, and that it isn't a good on its own. Hence, non VATable. Good call HMRC.
Just received a letter from Hmrc as to the uk policy regarding Bitcoin - they consider it a "cyber currency" and is the same vat regime as a "voucher" haven't had time to look into it yet .
Subject - Bitcoins
Thank you for your enquiry of 24 February 2013, regarding the VAT liability of a bitcoin.
Unfortunately I am unable to offer any advice regarding this matter at this moment. We are currently awaiting advice from the Policy group regarding this. As soon as we have any further information I will give a full and proper reply.
If you have any further queries regarding this matter, please submit your enquiry via our website, ensuring that you quote the case reference number at the top of this reply. Enquiries can be submitted by following the appropriate links on the VAT 'Contact us' page at www.hmrc.gov.uk
Thank you for your enquiry of 24 February 2013, regarding the VAT liability of a bitcoin.
Unfortunately I am unable to offer any advice regarding this matter at this moment. We are currently awaiting advice from the Policy group regarding this. As soon as we have any further information I will give a full and proper reply.
If you have any further queries regarding this matter, please submit your enquiry via our website, ensuring that you quote the case reference number at the top of this reply. Enquiries can be submitted by following the appropriate links on the VAT 'Contact us' page at www.hmrc.gov.uk
We got VATd for selling virtual currency on our social games - I expect bitcoins to be the same; however, if you are under the treshold, you got nothing to worry about.
Subject - Bitcoins
Thank you for your enquiry of 24 February 2013, regarding the VAT liability of a bitcoin.
Unfortunately I am unable to offer any advice regarding this matter at this moment. We are currently awaiting advice from the Policy group regarding this. As soon as we have any further information I will give a full and proper reply.
If you have any further queries regarding this matter, please submit your enquiry via our website, ensuring that you quote the case reference number at the top of this reply. Enquiries can be submitted by following the appropriate links on the VAT 'Contact us' page at www.hmrc.gov.uk
Thank you for your enquiry of 24 February 2013, regarding the VAT liability of a bitcoin.
Unfortunately I am unable to offer any advice regarding this matter at this moment. We are currently awaiting advice from the Policy group regarding this. As soon as we have any further information I will give a full and proper reply.
If you have any further queries regarding this matter, please submit your enquiry via our website, ensuring that you quote the case reference number at the top of this reply. Enquiries can be submitted by following the appropriate links on the VAT 'Contact us' page at www.hmrc.gov.uk
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