Place of Supply: HMRC guidance on VAT services
Recently, HMRC have updated their internal VAT manual to explain the “place of supply” regulations of services. This is a complex area of VAT legislation, which has changed somewhat since the UK left the EU.
What is the relevance of Place of Supply?
The place of supply is the country where a supply is deemed to be made and is the location where it is liable to VAT, if any. These rules are necessary to ensure that VAT, where payable, is paid only in the correct country. It is also to prevent the chance of supplies being taxed more than once or not at all.
How does affect services between businesses?
Services that are supplied between businesses (B2B) are generally taxable where the customer belongs. If the supplier and customer belong in the UK, then the UK supplier accounts for VAT on his supply. However, where the supplier is in the UK and the customer is outside the UK, the supply will generally be outside the scope of UK VAT.
Place of Supply to customers
If the supply is to a non-business customer (B2C), the place of supply is generally the location where the supplier belongs. There is however a common exception for ‘electronically supplied services’ which will be subject to VAT in the customer’s country of residence. This may require to the seller to be registered under the EU’s One-Stop Scheme.
Place of Supply and the European Union
If the place of supply of a service is within the EU, that supply is outside the scope of UK VAT. This means that it is liable to the VAT rules in that member state and in no other country. If the place of supply of a service is outside the UK and EU, that supply is described as outside the scope of VAT completely.
It is important to establish whether a supply of services is made to a relevant business individual (B2B) or non-business customer (B2C).
If you wish to view the updated internal HMRC guidance, you can do so here.
Our team will be happy to walk you through this complex area of VAT legislation, so that can understand your position better. Get in touch and speak to one of our team on 01903 023094.