Wood Group and VAT

[youfoolishboy]

An interesting point for those investing in the contractors especially Wood Group. The former FW office in Reading, latterly AMECFW now Wood Group have stopped paying UK VAT to engineers they hire via contract, usually about 70% of employees currently a bit lower just now due to them only starting to rehire contractors in any numbers a few months ago. They are claiming that because the contract employees are hired direct by a foreign company they should pay that countries VAT rate now that is a patent lie as far as I can see as my contract is always to the contractors not the client but they are forcing contract employees to sign a waiver saying they agree, no sign no job. I currently I have a few friends working on a Middle East project there and they are not being allowed to invoice for VAT. This is going to have a significant effect on Wood Groups bottom line I suggest if HMRC agree to their view of VAT. They obviously have legal counsel advising them on this and think they are in the right but in UK tax law being 100% correct in law does not mean you are right as I have found out before when I had a ruling against me for not being in the spirit of UK tax law whilst being 100% legally correct. Perhaps not the time to do this whilst under investigation for bribery and corruption mind you. Not sure if the other contractors In the UK will try this as they are all American owned and don’t know how they have set up their tax affairs.

[Nimrod103]

An interesting point for those investing in the contractors especially Wood Group. The former FW office in Reading, latterly AMECFW now Wood Group have stopped paying UK VAT to engineers they hire via contract, usually about 70% of employees currently a bit lower just now due to them only starting to rehire contractors in any numbers a few months ago. They are claiming that because the contract employees are hired direct by a foreign company they should pay that countries VAT rate now that is a patent lie as far as I can see as my contract is always to the contractors not the client but they are forcing contract employees to sign a waiver saying they agree, no sign no job. I currently I have a few friends working on a Middle East project there and they are not being allowed to invoice for VAT. This is going to have a significant effect on Wood Groups bottom line I suggest if HMRC agree to their view of VAT. They obviously have legal counsel advising them on this and think they are in the right but in UK tax law being 100% correct in law does not mean you are right as I have found out before when I had a ruling against me for not being in the spirit of UK tax law whilst being 100% legally correct. Perhaps not the time to do this whilst under investigation for bribery and corruption mind you. Not sure if the other contractors In the UK will try this as they are all American owned and don’t know how they have set up their tax affairs.

This cannot be the whole story, because I thought any VAT the contractor charges Wood Group should be passed on and charged to the foreign registered (non EU of course) client, who then reclaims the sum from the British Govt in full. It is a merry-go round which only benefits accountants. But could the UK be being tardy or difficult about refunding VAT?

[Nimrod103]

Not quite how it works though. The contractor's UK Ltd Co charges the UK agency Ltd Co including VAT. The agency Ltd Co charges Wood Ltd Co including VAT. The agency and Wood both reclaim the VAT. Only the contractor pays it over to HMRC. What Wood do with their end client is of no concern to the contractor.

OK, but my point was that the whole thing is set up so that, at the end of the day, somebody recovers the VAT sent by the contractor to HMRC because the ultimate client is outside the EU. So why is Wood Group acting in this way?

[TimR]

Having started my working life as a Post Office Telecoms Apprentice (TTA) in the 70's I migrated later into electrical /control & instrument engineering in the Oil & Gas industry. Following redundancy /early retirement in 2008 I have been working intermittently as a 'Ltd Co Freelance Contractor'. I have always been on the 'flat rate VAT ' scheme and charged 20% VAT. I know some 'Ltd Co Contractors' have moved off this scheme now when the scheme changed last April. I assumed they don't charge VAT anymore.

TimR

[youfoolishboy]

TimR
everybody that came of the flat rate VAT went on to paying VAT as normal ie adding up inputs and outputs instead of just deducting an agreed percentage.

Fred
it has not resulted in a rate cut but an increase! They were not competitive a few months ago but they are now taking people from Fluor where the rate was 20% higher. To be fair those leaving are doing so not because they will earn more but because of lifestyle issues either closer to home or too stressed at Fluor, the TCO job is hell to work on. I believe Reading is only £2 or £3 below the Fluor rate but no overtime to speak of.
Remember this is only for projects outside of the UK any project for the NS etc will not be affected so most of the Wood Group stuff will still be VATed.

[TimR]

TimR
everybody that came of the flat rate VAT went on to paying VAT as normal ie adding up inputs and outputs instead of just deducting an agreed percentage.

Are you saying that if you come off flat rate VAT then you still charge the Agency 20% VAT and you pay the HMRC the VAT you have charged at the same 20% rate but you can deduct any VAT you have paid on Petrol, stationery, computer equipment, etc ?

TimR

[youfoolishboy]

Yes that is what you do basically go back to what was done before the flat rate scheme.

[youfoolishboy]

I reread my initial post and see some room for confusion in what I wrote.
Wood Group are accepting invocies from contract employees with VAT when the client is from another country that does not charge VAT if it was a UK company they are doing work for then the would allow contractors to charge VAT.
The relevant section of tax law is

'If the place of supply of your service is not in the EU you don’t have to charge EU VAT but you should include the sale in box 6 on your VAT Return.'

https://www.gov.uk/guidance/vat-how-to- ... f-services