A new subsidiary

My client is a UK charity. It will shortly have a new trading subsidiary company LVT also based in the UK selling DVDs to worldwide markets.

All DVDs will be produced in France and – depending on the VAT implications – will perhaps be distributed from there as well. It is the base of distribution and its VAT implications that are causing us concern.

LVT is neither VAT registered nor trading at present. We outline the following scenarios assuming the customer is not VAT registered.

An order is received from outside the EU for batches of 500 to 1 000 DVDs at £60 net. Our UK client contacts the manufacturer in France which dispatches DVDs directly to the customer outside of the EU.

Who accounts for VAT and in which country and at what VAT rate?

If the goods are sold outside the EC on...