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VAT Place of supply of goods and services

Place of supply – Goods

Determining the place of supply for goods depends on whether the goods were supplied with transport or without transport.

Where goods are dispatched or transported by the supplier, the customer or a third person, the supply is deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer begins. But if dispatch or transport of the goods begins outside the UK, both the place of supply by the importer liable for payment of VAT and the place of any subsequent supply is deemed to be the UK.

Where goods are not dispatched or transported, the supply is deemed to be the place where the goods are located at the time when the supply takes place.

Goods supplied in a member state of the EU or a number of other countries throughout the world may make the supplier liable to register for the tax equivalent to VAT in tha country.

Place of supply – Services

The basic rule of place of supply for services is that supply of services between businesses (B2B services) is in principle taxed in the country where the customer is established while services supplied to private customers (B2C services) are taxed in the country where the supplier is established.

If you are based in the UK and the place of supply of your services is held to be in the UK you will need to charge and account for VAT according to UK VAT rules. But if you are in the UK and the place of supply of your service is held to be supplied in another country then you do not need to charge UK VAT.

There are a number of exceptions to the general rules outlined above, such as in relation to supplies of land-related services, for example estate agents or supplies of installed goods. Supplies in relation to land or installed goods may require a business to register and account for VAT in the country in which the land or installation is located, as this is where the supply will be subject to VAT. With a business’s VAT obligations depending on the nature of the services and their place of supply, it is crucial to confirm the correct means of VAT accounting at the earliest opportunity.

Where supplies fall under the general place of supply rule, the customer may be required to self-account for VAT under the reverse charge mechanism in their country of establishment, and so an understanding of how this mechanism works in practice is required to accurately account for the VAT on such services.

The reverse charge mechanism may also apply to UK VAT-registered businesses purchasing services from suppliers located abroad (although this is dependent on where the supply of the relevant service takes place).

The reverse charge applies to services where

  • the place of supply is the UK
  • the supplier belongs outside the UK
  • the customer is a relevant business person who belongs in the UK
  • the supply is not exempt (this includes exempt supplies subject to an option to tax), and
  • for supplies not within the general rule the customer is VAT registered in the UK.

The effect of the reverse charge is that a taxable supply is deemed to be made by the recipient of the service in the UK in the course of furtherance of business. The customer accounts for the output tax as if they had a made the supply themselves. The VAT may also be recovered as input tax subject to the normal rules.

It is also worth noting that anything that is done for a consideration that is not a supply of goods is a supply of services.

Contact Solve VAT

Our VAT consultancy is available to help on 0161 883 2120.

HMRC guidance

HMRC VAT Notice 741A