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VAT Place of Supply Rules for Services

Working out where a service is supplied for VAT purposes — known as the "place of supply" — determines which country's VAT rules apply and who accounts for the tax. The rules differ depending on whether you're supplying services to another business (B2B) or to a consumer (B2C)...

Introduction

Working out where a service is supplied for VAT purposes — known as the "place of supply" — determines which country's VAT rules apply and who accounts for the tax. The rules differ depending on whether you're supplying services to another business (B2B) or to a consumer (B2C), and the type of service you provide.

What place of supply means

The place of supply is the location where you're treated as making a supply for VAT purposes. This determines whether you charge UK VAT, foreign VAT, or no VAT at all.

If you're UK-based and the place of supply is in the UK, you charge and account for VAT according to UK VAT rules. If the place of supply is in an EU country, you don't pay UK VAT, but you may need to register and account for VAT in that country. If the place of supply is outside the EU, you don't charge VAT but must include the sale in box 6 of your VAT Return.

The general rule for place of supply

For most services, the place of supply depends on whether your customer is a business or a consumer.

Business-to-business (B2B) supplies: The place of supply is where the customer belongs.

Business-to-consumer (B2C) supplies: The place of supply is where the supplier (you) belongs.

This distinction is crucial. A B2B supply means you're supplying to a business, charity with business activities, local authority, or government department acting in a business capacity. If your customer provides a VAT number, you can presume they're in business unless you have information suggesting the service is wholly for private use.

A B2C supply means you're supplying to a private individual, a charity or government body with no business activities, or anyone receiving the service wholly for private purposes.

Where a business belongs

You belong in the UK if any of the following apply:

  • Your business establishment (head office or only office) is in the UK and you have no fixed establishments (subsidiary offices or agencies) in other countries
  • Your business establishment is in the UK and you have fixed establishments elsewhere, but the UK office is mainly concerned with supplying the services
  • Your business establishment is outside the UK but you have a fixed establishment here which supplies the services
  • You don't have a business or fixed establishment anywhere, but your business is a corporate body (such as a limited company) registered in the UK
  • You don't have a business or fixed establishment anywhere, but the UK is your usual place of residence

A business can only have one business establishment but can have several fixed establishments.

If you have establishments in multiple countries

If you have a business establishment in the UK and establishments elsewhere, you must look at what each establishment does. For example, if your company's head office is in the UK but has a French subsidiary that supplies services to local businesses, the French company belongs in France for VAT purposes — even though your head office belongs in the UK for supplies it makes.

Special rules for specific services

Some services follow special place of supply rules based on what's being supplied, rather than where the supplier or customer belongs.

Land and property services

The place of supply is always where the land or property is located, regardless of where you or your customer belong.

Land and property services include:

  • Construction, refurbishment, conversion, repair, maintenance and demolition
  • Professional services of estate agents, architects, and surveyors
  • Property management and maintenance services

Land and property includes the land itself plus buildings and structures (including installations such as oil production platforms), but not machinery installed within a building.

Hiring out transport

Whether short-term or long-term hire determines the place of supply for vehicles, boats, and aircraft.

Long-term hires (more than 90 days for boats and ships, or more than 30 days for other vehicles) follow the general rule — so B2B supplies are taxed where the customer belongs, and B2C supplies where the supplier belongs.

Short-term hires are supplied where the vehicle is physically handed over to the customer.

Means of transport includes road vehicles, caravans and trailers, motorcycles and bicycles, ships and yachts, aircraft, and railway rolling stock. It doesn't include freight containers, static caravans, or racing cars.

These special rules only apply to the transport itself. Services of a driver, pilot, operator, or crew follow the general rule.

Events

The place of supply for admission to an event is where the event takes place, wherever you or your customer are located. This includes:

  • Entertainment and cultural performances, including sports events
  • The right to attend exhibitions, conferences, meetings, or seminars
  • Ancillary services such as cloakroom facilities

For non-business customers, most supplies relating to cultural, artistic, sporting, scientific, educational events or entertainment are subject to VAT where they're carried out.

Intermediary services

If you're an intermediary (broker or agent) arranging or facilitating supplies of goods or services:

For business customers: The place of supply is where the customer belongs.

For non-business customers: The place of supply is the same as the place of supply of the service you're arranging.

Work carried out on goods

This covers any physical service on movable items (not fixed installations), including valuation, processing, manufacturing, repairs, maintenance, alterations, or finishing.

For business customers: The place of supply is where the customer belongs.

For non-business customers: The place of supply is where you physically perform the work.

Transport services

For passenger transport, the place of supply is where the transport takes place. If it takes place outside the UK, it falls outside UK VAT rules.

The reverse charge for services received from abroad

If your UK business buys services from outside the UK, the "reverse charge" applies. You must:

  • Convert the value of the services into sterling using the correct exchange rate
  • Calculate the amount of VAT due and include it in your VAT Return
  • Credit your VAT account with the VAT due (as if you had supplied the services)
  • Debit your VAT account with the same VAT amount

This means there's no tax to pay unless your business is partially exempt from VAT.

Broadcasting, telecommunications and electronic services

Special arrangements apply for charging VAT on the international supply of electronic services, including web hosting and music downloads.

Non-UK businesses supplying services in the UK

If you're a non-UK business and the place of supply of your services is in the UK, you may need to register for UK VAT. If you're not established in the UK, there's no registration threshold for taxable supplies of services. This means if you make any supplies of services taxable in the UK (where the reverse charge doesn't apply), you must register for UK VAT and account for it to HMRC.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.

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