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HMRC internal manual

VAT Place of Supply of Services

From
HM Revenue & Customs
Updated
, see all updates

Use and enjoyment: Electronically supplied services

Effective use and enjoyment takes place where the customer actually consumes the electronically supplied services irrespective of contract, payment or beneficial interest.

For electronically supplied services, the use and enjoyment provisions do not apply in any situation where the customer is a non-business customer. This is because most non-business customers are considered to use and enjoy the services in the same country in which they belong.

The use and enjoyment rules apply in the following situations where

  • the supply is to another business (and not to a private individual or non-business organisation). The place of supply would be the UK (because the supplier or the customer belongs in the UK) but the services are effectively used and enjoyed outside the EC, and
  • the supply would be outside the EC (because the supplier or the customer belonged outside the EC), but the service was effectively used and enjoyed in the UK. The place of supply of the electronically supplied services is where their effective use and enjoyment takes place and, where this is the UK, the services are subject to UK VAT.

Example 1

A UK business purchases digitised software from an Irish supplier for use only in its branch in the Channel Islands. Although the supply is received in the UK where the business belongs, it is used outside the EC and is outside the scope of UK (and EC) VAT.

Example 2

A USA business purchases web-hosting services for its international business, including its UK branch. Although the supply is received in the USA, to the extent that it is used in the UK, it is subject to UK VAT.

Example 3

A UK business purchases downloaded information from another UK business for use both in its UK headquarters and its Canadian branch. Although the supply is received in the UK, to the extent it is used in Canada, it is outside the scope of UK VAT. UK VAT is due only to the extent of use by the UK headquarters.

Examples of electronically supplied services not subject to use and enjoyment rules

The use and enjoyment rules apply in situations where the EC VAT position would otherwise be distortive. Consequently, they do not apply where the

  • supply is to a non-business customer, or
  • the place of supply is the UK (because either the supplier or the customer belongs in the UK) and the service was effectively used and enjoyed in another Member State, or
  • the place of supply is in another Member State (because either the supplier or the customer belongs there) but the supply is effectively used and enjoyed in the UK.