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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Check on business activities: services received from abroad

The legal position relating to the place of supply of services is explained in Notice 741A (Place of Supply of Services) and VATPOSS-Place of Supply: Services, (which must be referred to in cases of doubt).

If the supplier “belongs” in the UK, the supply is within the scope of tax. The notice and guidance give details of the rules of belonging, and of those supplies whose liability is decided by other criteria.

When the supplier has charged customers with UK VAT and has issued a tax invoice, no particular action is required by control officers visiting taxable persons in the UK, beyond the normal referencing procedure and checks on the supplier’s registration (for example VISION) in cases of doubt.

If in any case:

  • tax has not been charged by the supplier;
  • the service is not one of those zero-rated under VATA 94 Schedule 8 Group 7; and
  • there is a positive indication that the supplier belongs in the UK.

An urgent reference should be raised on the supplier’s folder. Consider also the likelihood of tax avoidance schemes and the need to consult the local TAPE team

It is not expected that a visit to the supplier’s premises will necessarily be required on every occasion that an urgent reference is received, provided information is held as to the liability of supplies, or a visit has recently been conducted.

If the supplier does in fact “belong” in the UK and is making taxable UK supplies above the registration limits, the trader should be registered for VAT and should charge UK VAT accordingly.

If at any stage, it is established that the place of supply is not the UK, consideration should be given to whether the service is one listed in VATA 94 Schedule 5.

In this case the UK taxable person receiving the service will be accountable under the reverse charge procedure as detailed in VATPOSS-Place of Supply: Services