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HMRC internal manual

VAT Place of Supply of Services

HM Revenue & Customs
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Belonging: Business establishments

The term business establishment is not defined in law, but it has been considered by the ECJ in the reference by Planzer Luxembourg Sarl (C-73/06), albeit in the context of the Thirteenth Directive. However, the Court decision did rely in part on the place of supply cases of Gunter Berkholz and DFDS A/S. So when looking at the definition of business establishment it is appropriate to apply the decision to the place of supply rules as well.

The Court ruled that the term business establishment means the place where the essential decisions concerning the general management of a company are adopted and where the functions of its central administration are carried out. The Court went on to say that

Determination of a company’s place of business requires a series of factors to be taken into consideration, foremost amongst which are its registered office, the place of its central administration, the place where its directors meet and the place, usually identical, where the general policy of that company is determined. Other factors, such as the place of residence of the main directors, the place where general meetings are held, the place where administrative and accounting documents are kept, and the place where the company’s financial, and particularly banking, transactions mainly take place, may also need to be taken into account.

This fits in with our long held interpretation of business establishment as meaning the principal place of business of a supplier, being a single place which is usually the head office, headquarters, or “seat” of the business from which the business is run.”

Following the earlier decision of the VAT Tribunal in DFDS A/S LON 93/2396A on the legal provisions relating to the Tour Operators’ Margin Scheme, we accept that where a trader has a headquarters in one country and other premises located in different countries, the headquarters is the business establishment for the purposes of the place of supply rules, and the premises in other countries are ‘other fixed establishments’. Although this case was subsequently referred to the ECJ, this aspect was not disputed.

In the UK the VAT Tribunals have consistently found that where there are no permanent premises from which a business is carried on, there is no business establishment. This was so in Singer & Friedlander Ltd (LON/87/159), [1989] VATTR 27, (VTD 3274) where the VAT Tribunal held that the presence of resident directors in the USA and the holding of intermittent Board meetings at various addresses in the USA were insufficient to create a business establishment there.

Similarly, in Andrew Marks T/A Marks Cameron Davies & Co (LON/ 95/1773) (VTD 15541) the Tribunal held that the mere presence of husband and wife directors at their home in Melbourne, Australia was insufficient to create a business establishment because they could make decisions wherever they were, especially as they had maintained no formal minutes of any decisions taken.