Establishment making or receiving the supply: Force of attraction
The force of attraction is a principle adopted by some countries whereby VAT is due from a business established in the same territory as their customer even though that establishment does not play an active role in supplying the services concerned.
The EC legislation includes a new Article 192a stating that VAT is not due from a fixed establishment within the territory of a Member State unless that establishment intervenes in the supply. This statement has been included in European law to address concerns over the ‘force of attraction’ principle. The UK has never adopted this principle.
The UK position is that the establishment making the supply is the one most closely connected to it. Therefore, minimal involvement in making the supply will not be viewed as ‘intervening’.