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HMRC internal manual

VAT Place of Supply of Services

HM Revenue & Customs
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Establishment making or receiving the supply: Determining where the customer of electronically supplied services belongs: Customer's country

Acceptable procedures

Under normal trading practices suppliers will often know their business customers and where they are located. However, this is less likely to be the case with supplies to private customers and with lower value transactions to business customers. As technology cannot determine with certainty the place where such customers belong, self-declaration by the customer combined with a reasonable level of verification will be acceptable.

Many businesses already have in place established procedures to identify and verify the country where their customer belongs. HMRC will rely as much as possible on that practice to ensure business is not burdened with unnecessary requirements. If the method used is not included in the list of examples below, businesses should contact HMRC for confirmation that their procedure is acceptable.

Where one or other of the following practices is followed, customer self-declaration will be acceptable (without prior approval from HMRC) in respect of electronically supplied services

  • use your customer’s postal address provided it has been used to send goods, catalogues, samples, CD ROMs, invoices, correspondence, and so on and the correspondence has not been returned (but alternative means will have to be used if mail is returned undelivered)
  • accept payment by credit/debit card and you compare the customer’s home address with the billing address, but then rely on satisfactory alternative evidence if the match is unsuccessful
  • accept payment by credit/debit card and, using proprietary software, you compare the customer’s country of residence with the location of the issuing bank but then rely on satisfactory alternative evidence if the match is unsuccessful
  • use geo-location or proprietary software to verify where your customer belongs but then rely on satisfactory alternative evidence if the match fails, or
  • use systems that are configured to identify where the service is used and enjoyed (eg telecommunication suppliers) - we will accept the arrangement as a proxy for identifying the country where the customer belongs.

If a business uses one or other of the above methods, it will need to demonstrate that HMRC’s requirements have been met.

Customer provides incorrect information

Where verification has been undertaken and the details provided were believed to be correct at that time, but subsequently the customer is found to have made a false declaration, we will not seek to recover VAT from the supplier where it was not charged to the customer. This does not apply if there was reasonable information at the time of the sale to indicate that the customer’s information was incorrect.

HMRC’s treatment of such cases will be subject to periodic review.