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HMRC internal manual

VAT Place of Supply of Services

HM Revenue & Customs
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Reverse charge: registration


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 VATPOSS06000), the customer is VAT registered in the UK.

The effect of the reverse charge is that the supply is deemed to be made by the UK customer instead of the overseas supplier. Consequently although the overseas supplier is making supplies of services that are within the scope of UK VAT, they are disregarded and so do not count as taxable supplies for the purposes of registering under Schedule 1 of the VAT Act 1994. Where, on the other hand, the relevant UK business customer is unregistered, any reverse charge services they receive must be added to their taxable turnover when considering the need to register.

Example 1

An overseas supplier, with no establishment in the UK, provides construction services to a business customer that belongs and is VAT registered in the UK. The services relate to building work at a site in London. Because

  • the customer belongs in the UK
  • the supplier belongs overseas
  • the work is not potentially exempt, and
  • the place of supply is the UK

the customer is therefore required to account for the VAT as a reverse charge. The services do not give the supplier an entitlement for register in the UK. Any UK input tax incurred by the supplier can only be recovered using the refund mechanisms for EC and non-EC businesses. For more information about this see Notice 723A: Refunds of VAT in the European Community for EC and non-EC businesses. However, if the supplier carries out other business activities in the UK and has been registered as a Non Established Taxable Person for the purpose of those activities, they should recover the input tax on its UK VAT return. But they cannot include the output tax due on the construction work on the return and the customer is still obliged to apply the reverse charge.

Example 2

A wholly exempt UK insurance broker buys in various general rule services from overseas. The broker is a relevant business person and so these services count towards the registration threshold. As a result they may be required to register for VAT in order to account for reverse charges.

Example 3

A German business hires machinery to UK relevant business customers. The machinery is purchased in the UK and sold here at the end of the hire. The place of supply of the hire services is the UK and the customer is required to account for the VAT using the reverse charge. Although the hire services will not give the German business an entitlement to register under Schedule 1, the sale of the goods may result in their becoming VAT registered in the UK. However, even if the German supplier is registered in respect the disposal of the machinery they cannot account for the output tax due on the hire services. The hire customer will still be required to account for VAT using the reverse charge mechanism.