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HMRC internal manual

VAT Place of Supply of Services

From
HM Revenue & Customs
Updated
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Use and enjoyment: Determining use and enjoyment

Where only part of the supply is consumed in the UK the extent of use and enjoyment will in many cases be difficult to quantify. It is therefore important that a systematic and practical approach is taken to avoid disputes. Where you identify use in the UK, of part of a supply of telecommunications services supplied by a non-EC provider, you should invite the trader to suggest a method of quantifying this use. If the trader is unable to offer any workable method, or the method offered is unacceptable, a reasonable suggestion should be made using factual data.

For example, measured usage, internal management records showing inter-company recharges, percentage of business transactions at the specific location, proportion of telecommunications equipment, number of sites (this of course assumes equal use at all sites, which may be reasonable in the absence of information to the contrary). It is always advisable to follow up any conversations or discussions with written correspondence to avoid misinterpretation of the facts. If the trader does not accept a suggested method they should be invited to comment why and to suggest an alternative. This approach should eventually result in a mutually agreeable solution.

Effective use and enjoyment takes place where a recipient actually consumes services irrespective of the contractual arrangements, payment, or beneficial interest. For goods supplied on hire we would expect this to be where the goods are physically situated for the duration of the supply. Consideration should be given to where hired goods are used and enjoyed when the EC VAT position would otherwise be distortive.

The place where goods on hire are used and enjoyed will determine the place of supply when

  • the place of supply of goods on hire would be the UK, because either the provider or the recipient belongs here, but the services are effectively used and enjoyed outside the EC, the place of supply is where the services are used (such supplies are outside the scope of UK VAT to the extent that they are used and enjoyed outside the EC), or
  • the place of supply of goods on hire would be outside the EC, because either the provider or the recipient belongs there, but the services are effectively used and enjoyed in the UK, the place of supply is the UK to the extent that they are used and enjoyed here.

Services of hired goods will be taxable where they are used and enjoyed when supplied

  • by a UK provider to a UK customer or a non-business customer in another member State, to the extent that use and enjoyment takes place outside the EC, or
  • by a non-EC provider to a UK customer or a non-business customer in another member State, to the extent that effective use and enjoyment takes place in the UK.