Readers’ forum: VAT challenges for goods processed in Germany.

I act for a client based in the UK which manufactures and then sells paper products. The business has a lot of EU business customers.

For one particular contract for a customer in Germany my client will send the paper from the UK to a warehouse in Germany to a separate supplier based there. The supplier will then process the paper into smaller packs known as a ‘processing service’ and deliver it to the final customer. So for example we would normally charge £10 000 for the paper in its original state – the supplier will charge us £5 000 for the extra work – and we will mark-up this payment by 50% to charge the final customer in Germany £17 500 in total. All figures exclude VAT.

What do we do as far as both UK and German VAT is concerned? Readers’...