Businesses need to be more flexible than ever before when delivering their goods and services to customers.
In order to compete successfully, it’s necessary to consider how quickly a good can be delivered; whether the price is competitive; and if costs are being minimised. To stay ahead of the competition, new supply chains are rapidly imagined and implemented. This leads though to the challenge of keeping on top of the VAT obligations that they create.
VAT Issues from Sales Growth
We were recently approached by a client who needed assistance understanding the VAT implications of a new supply chain it was involved with. Quite often, as in this case, salespeople are driving new commercial arrangements, but with (understandably) little awareness of potential VAT consequences.
On a call with one of our experienced consultants and the new client’s allocated Business Development manager, we were able to grasp in detail the supply chain and provide the client with an option that greatly reduced its expected compliance obligations.
Complexity equals Risk
The client was established in Spain and had just concluded a contract to supply goods to a customer established in Germany. However, the customer had specified that it wanted the goods to be delivered to one of its warehouses in the UK. To also complicate matters, our client was going to be sourcing and delivering the goods from a location in Italy. Consequently, the client was worried that it needed an Italian and German VAT number and was concerned about the associated costs of this.
Having discussed the issue in detail with the client and understood the status of all the parties involved, we could conclude that the “Triangulation” rules could apply. These rules are in effect a simplification for businesses, allowing them to avoid the need to register for VAT in certain instances by shifting compliance obligations onto other parties in the supply chain.
Following our advice, the client was able to avoid the need to obtain any additional VAT registrations, as the obligations these would be used to meet were met by the other parties. We also assisted the client to explain the situation to its customer and supplier. Upon realising that there was minimal extra work for them involved, they were happy to adopt the Triangulation rules. This was a positive result for our client and proved to them the benefit of discussing the VAT implications of new supplies up front, as the advice led to them enjoying significant savings going forward.