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HMRC internal manual

VAT Place of Supply of Services

Belonging: Relocation of broadcasters and telecommunication and internet service providers

Introduction

Changes affecting B2C supplies of telecoms, broadcasting and e-services come into effect in 2015 (see guidance  VAT: businesses supplying digital services to private consumers). In the meantime some suppliers may attempt to put in place structures that purport to move the place of supply to a Member State with a more favourable VAT rate. In May 2009 HMRC published a Revenue and Customs Brief (58/09) about this. It is reproduced below. Its readers are warned that we will carefully scrutinise any structure or scheme under which services supplied to UK customers, using UK resources, are claimed to be made from a Member State with a lower rate of VAT. If you become aware of anything like this you should contact the VAT Supply Team.

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Revenue & Customs Brief 58/09 - VAT: Relocation of telecommunication service providers, Internet service providers and broadcasters

This Revenue & Customs Brief is of interest to all businesses within the telecommunications, Internet service provision and broadcasting sectors who claim to have moved or may consider moving the place of supply of their services from the UK to another Member State. The purpose of this Brief is to explain HM Revenue & Customs (HMRC) concerns and intended response and to encourage you to discuss these arrangements with your Customer Relationship Manager or the alternative contact given below.

HMRC are aware that some businesses within the telecommunications, Internet service provision and broadcasting sectors have implemented arrangements that claim to move the place of supply of their services from the UK to another Member State in order to take advantage of more favourable VAT rates.

The place of supply of telecommunications, Internet service provision and broadcasting services when provided to non-business customers in the EU is the place where the supplier is established. Some suppliers to the UK market claim to have reorganised their businesses so that the place of supply is no longer in the UK but another Member State.

HMRC accepts that businesses have the freedom to choose where to locate and to enjoy any resultant benefits.

However, HMRC will carefully examine all such arrangements. Where HMRC considers that there are sufficient human and technical resources in the UK to form a fixed establishment from which the services are supplied, or where the entity purporting to make the supplies does not have a sufficient presence in the other Member State to be established there, HMRC will mount a robust challenge.