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HMRC internal manual

VAT Place of Supply of Services

Reverse charge: services to which the reverse charge applies


The references in this section are to the reverse charge as it operates in the UK. However, other Member States can apply equivalent provisions although, generally speaking, the UK applies the reverse charge provisions more widely than elsewhere in the EU.

The reverse charge applies to services where

  • the place of supply is the UK
  • the supplier belongs outside the UK
  • the customer is a relevant business person (see VATPOSS01350) who belongs in the UK
  • the supply is not exempt (this includes exempt supplies subject to an option to tax), and
  • for supplies not within the general rule (see VATPOSS06300), the customer is VAT registered in the UK.

The effect of the reverse charge is that a taxable supply is deemed to be made by the recipient of the service in the UK in the course of furtherance of business. The customer accounts for the output tax as if they had a made the supply themselves. The VAT may also be recovered as input tax subject to the normal rules.

In terms of the supplier, the service is disregarded and so they do not need to account for any output tax and it does not count toward their total taxable supplies in the UK for the purpose of registration (see VATPOSS14700).

Where a supplier has establishments in more than one country they are regarded as belonging in the country from where the supply is made (see VATPOSS05000). Therefore the reverse charge may still apply for services supplied to UK customers even if the supplier has a UK establishment. For example, where the establishment making the supply is an overseas branch or agency and the UK establishment does not intervene in the supply (see VATPOSS05100).

The test for the reverse charge is the place where the supplier and customer belong. Consequently, the position is unaffected even if the supplier is a non-established taxable person and has a UK VAT registration number. This might be the case if they also supply goods located in the UK. So, if somebody in this position makes supplies of services to a customer who belongs in the UK, the reverse charge will always apply.

Example 1

A US supplier provides webhosting services to a UK business customer. The place of supply of B2B webhosting (an electronically supplied service) falls under the general rule and so it is taxable where the customer belongs. As the supplier

  • belongs outside the UK
  • the customer is a relevant business person in the UK, and
  • the supply is not exempt

the reverse charge will apply. The customer must account for output tax on the service received and may claim this as input tax, subject to the normal rules on recovery.

Example 2

An Australian business purchases commercial premises in London and rents them to a UK VAT registered business customer. The Australian supplier wishes to exercise the option to tax turning the rent into a taxable supply with the customer accounting for the VAT as a reverse charge. However, although

  • the supplier belongs outside the UK
  • the customer belongs and is registered for VAT in the UK, and
  • the place of supply is the UK

the reverse charge cannot be applied because the supply would be exempt were it not for the option to tax. As a result, to exercise the option, the Australian business will be required to register for VAT in the UK and account for the VAT itself.

Example 3

A Spanish business hires cars to UK businesses, some of which are registered for VAT. The cars are hired out for a maximum of 28 days and put at the disposal of the customer in the UK.

The place of supply of a short term hire of a means of transport is the country in which the means of transport is put at the disposal of the customer. On this basis the place of supply of the hire services in this case is the UK. However, although

  • the supplier belongs outside the UK
  • the customers belong in the UK, and
  • the supply is not exempt

the supply does not fall under the general rule. Consequently the reverse charge only applies to the business customers who are VAT registered. As a result the Spanish business may be required to register and account for UK VAT if the value of its supplies to non-registered (and non-business) customers exceeds the registration threshold. If it does register for VAT it cannot include the supplies made to VAT registered customers on its return as these will still be subject to the reverse charge.