Goods and Services Tax (GST) is charged at 5% on most goods and services supplied in Jersey. For many local businesses it is simply part of everyday trading. Two areas cause more confusion than most, though: Knowing when you have to register, and understanding the reverse charge on services bought from outside the island.
In this article we explain both, and what they could mean for your business.
When you need to register
A business becomes liable to register for GST in one of two ways. The first is at the end of any month in which its taxable supplies over the previous 12 months have exceeded £300,000. The second is on any day when there are reasonable grounds to expect its taxable supplies over the next 12 months to exceed £300,000. Sales of the business's own capital assets, such as equipment or premises, don't count towards the threshold.
The test looks at a rolling 12-month period rather than your accounting year, so it's worth checking your turnover every month, particularly if your business is growing. Once you become liable, you have 30 days to notify Revenue Jersey. Failing to do so without a reasonable excuse is an offence.
Once registered, you charge GST on your sales, file regular returns with Revenue Jersey and pay over the tax you have collected. In return, you can usually reclaim the GST you pay on your business costs.
Businesses below the threshold can choose to register voluntarily. This can make sense if most of your customers are GST-registered themselves, or if you pay a lot of GST on your costs and want to reclaim it. It does mean more administration, though, and if your customers are mainly private individuals it could make your prices 5% higher for them.
The reverse charge
When a Jersey business buys services from a supplier outside the island, the supplier usually doesn't charge Jersey GST. Under the reverse charge, the Jersey business works out the GST due on the service and accounts for it on its own GST return
The rules cover a wide range of services, including professional services from lawyers, accountants and consultants, advertising, software and other electronically supplied services, the supply of staff, and banking, financial and insurance services. For GST-registered businesses, almost any service bought from overseas is caught.
For example, a GST-registered business in St Helier pays a UK firm £20,000 for IT support. It records £1,000 of GST (5% of £20,000) as tax due on its return. If the business is fully taxable, it can normally reclaim the same £1,000 on that return, so there is no cash cost. The transaction still needs to appear on the return, and it's easy to miss.
The reverse charge becomes a real cost for businesses that can't reclaim all of their GST. This often applies to businesses making exempt supplies, such as some financial services. For them, the GST due on imported services may be only partly recoverable, or not recoverable at all.
Imported services can also affect whether you need to register at all. The law treats the value of reverse-charged services as taxable supplies when working out whether you have passed the £300,000 threshold. A business that buys significant services from overseas could therefore need to register even if its own sales are below the threshold.
Did you know overseas software subscriptions could count towards your GST threshold?
Have you already crossed the threshold?
Many businesses pass the £300,000 threshold without realising it. This can happen because the test uses a rolling 12 months rather than your financial year, or because overseas services such as software subscriptions, advertising or professional fees count towards the total.
Missing it can be costly. Revenue Jersey can register you from the date you should have registered, so GST may be due on your sales from that point, even if you never charged it to your customers. If your turnover is getting close to £300,000, or you buy significant services from outside Jersey, now is a good time to look at your position.
In summary
- Register for GST once your taxable supplies pass £300,000 in any rolling 12 months, or are expected to in the next 12, and notify Revenue Jersey within 30 days.
- Services bought from outside Jersey usually fall under the reverse charge. They need to appear on your GST return, even when there is no cash cost.
- Overseas services can count towards the threshold, so if you are close to £300,000 or buy significant services from abroad, review where you stand.
How we can help
At BestwickRussell, we help Jersey businesses work out whether they need to register for GST, complete their registration and file accurate returns. We can also review your overseas costs to check whether the reverse charge applies and what it means for you.
A quick check now costs far less than a backdated registration later.
