VAT – the Flat Rate Scheme and distance sales

My client’s company sells goods from the UK over the internet to UK and French consumers. It is VAT registered using the Flat Rate Scheme (FRS) and has always applied FRS VAT to all sales. It has just exceeded the French distance selling threshold so will account for French VAT on French sales from now onwards. Do we still include these in the FRS calculation?

No. Only sales with a UK place of supply have to be included in the FRS VAT calculation. When selling goods to non-VAT-registered customers in the EU (distance selling), the place of supply is the UK unless or until one of the following happens:
 
a) the supplier opts to voluntarily register in the destination country (see Notice 725 para 6.10) 
 
or
 
b) it has exceeded the destination country's distance selling threshold. In these cases, the place of supply switches to the destination country (Notice 700 para 4.8.2). 
 
In your client’s scenario the sales to French customers will now have a French place of supply, meaning these sales are excluded from your client’s UK FRS calculation. Distance sales are not caught by the deemed supply provisions, so there is no ‘deemed’ UK supply either (see HMRC Manual VATSM4640).

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