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HMRC internal manual

VAT Place of Supply of Services

Establishment making or receiving the supply: Determining where the customer of electronically supplied services belongs: Status and location of the customer

Suppliers of electronically supplied services need to know the country where a customer belongs and whether the customer is a relevant business person. This will help determine the place where the supplies are made and, if made in the EU, in which Member State.

Verifying business status

For B2B supplies within the EC the evidence required at the time of the transaction would normally be the customer’s VAT registration number and country identification code prefix. The number must conform to the format for the registered person’s Member State. Guidance on this can be found in Notice 725 (The Single Market).

Under normal trading practices businesses will often know their business customers and, in these cases, they will not need to routinely check all VAT numbers quoted, provided that the numbers conform to the correct country format.

However, where a relationship has not been established with a business customer the VAT number should be checked when

  • the VAT involved exceeds £500 on a single transaction, or
  • the cumulative VAT on transactions for electronically supplied services to a single customer in a VAT quarter exceeds £500.

Similarly, businesses that supply downloaded music, games, films, and so on of a kind that is normally made to a private consumer would not expect a VAT number to be quoted.

The VAT Information Exchange System (VIES) can support the supplier’s decision-making process by providing an online verification system. The system can be accessed on the Europa EC website.

Businesses may also contact the VAT, Excise and Customs Duties Advice Line, as they will be able to verify names and addresses as well as dates of registration and deregistration where appropriate.

Unsatisfactory verification of business status

Where a VAT number is quoted in what is clearly a supply to a private consumer the use of that number should be challenged. Full verification should be undertaken in all cases where a business has any reason to believe that a VAT number quoted by a customer is false or is being used incorrectly.

If a customer claims to be in business but not to be VAT registered then alternative evidence should be obtained. This can be in the form of other reasonable commercial evidence or records that should normally be available, for example contracts, business letterheads, a commercial website address, publicity material, certificates from fiscal authorities, and so on. A digital certificate from a reputable organisation can also be used for this purpose.

If any of above checks fail to confirm that the customer is in business or if there remains any doubt about the use of a VAT registration number, VAT should be charged as appropriate on all supplies to that customer including supplies that have already been made.

Treatment of VAT charged in error

Any VAT that has been charged in error may be credited under the normal rules.