Place of Supply conundrum, I know it should be simple.

[spencergate]

I've been readining up on the VAT "place of supply rules", and my head is spinning, partly because there are all sorts of rules for digital services.

Company A has it's office in UK. It produces websites and advertising campaigns . One of the directors in the business lives in USA, has a design studio there, so some of the work gets produced in USA, but most is carried out in UK. All admin tasks including invoicing etc are carried out in UK.

Along with it's UK clients, it has one client in Germany, one in USA.

So for invoicing, what are the place of supply rules, how do we levy VAT?

 

[spencergate]

Ha, I see no-one else cares to guess either.

I will ring the helpline when I've got half an hour to spare

 

[Kevin Hall]

Advertising services and website-design services are both supplied where the customer belongs. It does not matter where the services are performed (for UK VAT purposes).

Obviously, the devil is often in the detail and I would usually want to examine your contracts and quiz you about who does what exactly, in case your services do not fall within the VAT categories of "advertising services" or "website design".

But if your services are what I think they are, then the sales invoices to the US customer has no UK VAT and should state "No VAT: Services supplied outside the EC"; and the sales invoices to the German customer should show the customer's German VAT registration number and state "No VAT: Reverse Charge supply".

Finally (if your services are what I think they are), for your UK clients the place of supply is the UK. So if you are UK VAT registered, you should charge UK VAT.

Interestingly, if you buy any of these services in (e.g. if you have a sub-contractor relationship with the US service-provider), these purchases will be Reverse Charged by you in the UK. This means that you would charge yourself UK VAT, as if you had supplied the services to yourself. I will not go into too much detail in case (i) you have no such purchases and (ii) your spinning head twizzles right off!

Hope that helps?

 

[trilby274]

I would think that if the work that is produced in the USA is only a partial product supplied back to the company in the UK for incorporation into a final product, then the point of supply is the UK. Even if the supply from the USA is a completed product and then sold from the UK, the point of supply is still the UK.

The US client is exempt from VAT (I think) and the German client is subject to the normal 'supplies to the EU' rules.

Probably wrong but hey-ho - had a go

 

[Kevin Hall]

I would think that if the work that is produced in the USA is only a partial product supplied back to the company in the UK for incorporation into a final product, then the point of supply is the UK. Even if the supply from the USA is a completed product and then sold from the UK, the point of supply is still the UK.

The US client is exempt from VAT (I think) and the German client is subject to the normal 'supplies to the EU' rules.

I should indeed have stated my assumption along these lines. For the website supply (which I assumed were design services), I am assuming that the client is "using" or "enjoying" the website in the country where you say the customer is located.

 

[spencergate]

I should indeed have stated my assumption along these lines. For the website supply (which I assumed were design services), I am assuming that the client is "using" or "enjoying" the website in the country where you say the customer is located.

Well technically the client is "using" or "enjoying" the website worldwide.

 

[Kevin Hall]

Yes, the definitions of "use/enjoy" are not cut & dried. OK, then it is an opinion from me and a referral to HMRC for a definitive answer. But beware that the telephone comments from HMRC (even if accompanied by a reference number) are not legally binding on HMRC. To get a legally binding opinion, you must write to HMRC (they will give you the details over the telephone if you want to do that).

My opinion:

1. Advertising services:

1.1 ... supplied where the business customer belongs (regardless of whether this is advertising via the internet, or some other kind of promotion work).

1.2 But is what you are doing advertising, or could it be something else?

2. Website services:

2.1 ... is usually supplied where the business customer belongs.

2.2 But if the (say) US customer has a UK office which uses the website, it is ciritical to establish precisely what web-related service is being provided.

2.3 For example, logo-design could be mere design-services and is always supplied where the business customer belongs.

2.4 But, as another example, web-hosting services are supplied where "used". And, to the extent that the US customer uses the website service, it is supplied in the US; and to the extent the UK office uses the website service, it is supplied in the UK (and is subject to a UK VAT charge).

2.5 On what criteria you apportion who uses the service and to what extent, would require more detail than you have provided, as it is likely to be an "ad hoc" rationale.

3. If your customer is not in business (or is not using your services for business purposes), you have a different set of issues to consider and might well have to charge UK VAT (assuming you are UK VAT registered).

So in summary, it is best to agree the outcome with HMRC in writing, if you want to establish certainty on this.

Good luck!

 

[spencergate]

Thanks Kevin. As I say I know I need to get a definative answer on this from HMRC, thanks for pointing out that I need that in writing too.

The company concerned is newly formed, and I'm involved in their first VAT return, which is why I want to get it right from the beginning