Andrew Needham looks at the circumstances when applying the reverse charge can cause a business to have to register for VAT.
When a business buys services from an overseas supplier, it has to treat them as a deemed supply as well as a purchase. This means that even though the overseas supplier has not charged the UK business VAT, it must charge itself VAT and then it can reclaim it providing it is attributable to the making of taxable supplies.
Even though a business is not VAT-registered, its purchases of services from overseas are treated as a deemed supply by it and count towards its taxable turnover for VAT registration purposes, which can cause it to register for VAT if its taxable turnover (including the deemed value of its purchases of services from overseas) exceeds £85,000 per annum.
VAT recovery
In normal circumstances, businesses can recover the
