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HMRC internal manual

VAT Place of Supply of Services

Hire of means of transport: Continuous possession or use

A short term hire of a means of transport is one where the vehicle is hired for the continuous possession or use of not more than 30 days, or 90 days for vessels. Any hire beyond this period is a long-term hire.

The duration of the continuous possession or use is largely a matter of fact. The starting point for determining the length of the hire should be the hire contract.

When two or more contracts for the hiring of the same means of transport follow each other with an interruption of 2 days or less, the first term of the contract needs to be taken into account in deciding whether the second term is seen as short term or long term. If the two contracts together exceed 30 days (or 90 for vessels) then the second and subsequent consecutive contracts are treated as long term hires. The original contract (if a short term hire) is not reassessed retrospectively, providing that there is no evidence of abuse of law.

When a short term hire contract is extended causing it to exceed the 30 (or 90) day period then the place of supply is retrospectively reassessed unless the clearly established circumstances show that events were outside of the control of the parties involved (force majeure).

Where a second short time hire takes place between the same parties but relates to a different means of transport, or has significant different terms, then these contracts will need to be examined separately, providing that there is no evidence of abuse of law.

Example 1

A French builder hires a van for three weeks, ending on a Friday. The van is delivered to his yard in the France by a Spanish hire company. At the end of the hire the builder decides that he needs another van from the following Monday. He contacts the Spanish company and takes out a new three week agreement effective from the Monday. The same hire van is used for both contracts.

Both contracts are short term hires of a means of transport. As the period between the hires is more than 2 days it is not considered to be a consecutive hire.

Example 2

A Dutch businessman hires a car from a Belgian company and has the vehicle delivered to his home. The hire agreement is for 28 days. Towards the end of the agreement the businessman phones the hire company and tells them he needs the car for another week. The contract is extended.

When the original agreement was taken out it was for a short term hire. The place of supply was where the vehicle was put at the disposal of the customer. However, as the contract was extended making it over 30 days, it then became a long term hire and was taxable under the general rule (being a B2B supply). The hire company is no longer liable to account for the hire in the Netherlands as the customer accounts for general rule supplies using the reverse charge.

Example 3

A non-business customer living in the Republic of Ireland hires a car from a UK supplier. The car is delivered to his home. The contract is for 28 days use of the vehicle. The customer decides that he needs the vehicle for a little longer and takes out another one week contract for the same vehicle starting when the first agreement ends.

The original contract is to 28 days and so is a short term hire of a means of transport. The place of supply is where the vehicle is put at the customer’s disposal (that is, the Republic of Ireland). As the second hire starts less than two days after the first finished and is for the same vehicle, the original hire must be taken into account when considering the second. As the combined hire now covers 35 days the second contract is classed as a long term hire and is supplied where the supplier belongs (being a B2C supply). There is no retrospective adjustment to the first agreement. This means that the supplier is required to account for Irish VAT for the first 28 days and UK VAT for the last 7 days.