metaspan is providing hosting, infra, software development and consulting services (under a Referenda, via IBP) and being paid in KSM.
In the UK, any individual or company that has >£60k sales must register for VAT. (e.g. window cleaner, builder, professional services).
This means any UK VAT registered person (incl. legal entity) that is paid for services (USD, GBP, DOT or KSM) must charge VAT and pay the VAT over to HMRC.
The legal advice we have points to the origin of the service, which depends (in the UK) on B2B or B2C scenario.
B2B: origin of the service is the customer, and VAT can be excluded if the customer is a business, with registered address, and they are paying VAT/tax in their local country.
B2C: origin of the service is the supplier, and UK VAT is always charged.
I’m asking people to comment on the topic as I expect there are cases where VAT or tax is due, and we need people to be aware of this.
From 1 January 2021, Para 16 is extended to any consumer outside the UK, ie EU and non-EU consumers.
So, accountants would not charge VAT to any overseas client from 1 January 2021. B2B services remain basic rule while B2C services are covered by Para 16.
I requested clarification from our accountant that, as we are not able to prove Polkadot/Kusama being a business, would Para 16 not therefor treat receipts for services to ‘the polkadot community’ under B2C, and as per Para 16 we would not need to charge VAT?
I’m not an accountant but have run a few companies. Where’s the 60,000 figure come from? I would have thought the figure was 85,000 pounds: Register for VAT: When to register for VAT - GOV.UK. I thought the vat threshold had been 85k for quite a few years?
Thank you for the correction, I pulled the figure from memory, and it was £60k back in the day…
I can’t correct the error above - it seems I am not able to edit the original message.
After many hours of consultation with our tax advisors, I made a summary of our position:
Who is the provider?
Metaspan ltd
UK company, already registered for VAT
Who is the customer?
IBP
is a membership organisation, is paying, is signing off expenses
Analogy (services to a charity, that has wider beneficiaries)
Private or business
Not wholly for private purposes (i.e. is a business)
Where does the customer ’belong’ for VAT purposes
No head office
No legal place of registration
Where is it managed and controlled from?
Meet virtually
Where do the curators live?
Curators need to confirm:
Country of residence, or
Not resident in UK
If curators agree to disclose their location, IBP could be liable to register for VAT in those locations.
Place of belonging “of an individual”
Catch-all: stateless = charge VAT
Summary: We do not want to involve curators in the legal & tax issues of the treasury or IBP. Due to the stateless nature of the customer, HMRC would most likely require VAT on the proceeds.
Conclusion: metaspan ltd should charge VAT on services to IBP
Hey Derek - thanks for pushing this - this is part of what I hope will we can push into a wider discussion about how we can create greater support and understanding for those trying to build businesses in support of the ecosystem - right now, the risk falls entirely on those attempting to deliver a range of network services.
Following our chats, our accountants have gone back on previous advice they gave us that invoices should be zero rated on VAT.
Here is the following:
Generally, VAT on services are issued as per the place of supply rules where B2B supplies are considered to be where the customer is based (if non-UK, then no VAT chargeable) whilst B2C supplies are where your company is based (UK, therefore VAT should be charged).
The supply of your services to the networks cannot be determined to be B2B as the network has no legal jurisdiction, is not VAT registered and has no legal structure or base. Therefore, under UK VAT rules, this supply would automatically revert to B2C and therefore you should be charging UK VAT on your invoices to the networks.
What this means in practice for my company is we now owe HMRC a decent chunk of money.
With the amounts invoiced already, you have two choices:
Assume the amount received/invoiced to date is your gross figure, including VAT, adjust the invoices accordingly and then pay over the VAT, or
Send a VAT only invoice to the network for 20% of the amounts invoiced so far, then pay this over to HMRC on your next VAT return.
Additional note for others regarding goods/services taxes - VAT is a standard that is also applied in other jurisdictions, for example in france it is TVA, and India it is GST which are 20% and 30% respectively…