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HMRC have updated their policy on the place of supply of services connected to land. The department has also published details of changes to the handling of exhibition stands, storage and warehousing, and access to airport lounges.
In most cases in which services are supplied by a firm in the UK to a business customer in another EU member state, no UK VAT is charged by the supplier, and the customer has to account for VAT using the reverse charge.
Similarly, most services supplied by UK firms to business customers located outside the EU will not be subject to UK VAT.
In the case of services connected to land and property, Article 47 of the EU VAT Directive makes the service subject to VAT in the country in which the land is situated.
Changes to the place of supply rules from 1 January 2010 and 1 January 2011 highlighted differences in the treatment of certain supplies in various member states, which has led to businesses suffering double taxation.
As a result of discussions with the EU, the Revenue will alter aspects of its policy on the place of supply of stands at exhibitions, storage of goods, and airport lounges.
The department currently regards the supply of specific stand space at an exhibition or conference as a supply of land. The policy will continue where the service is restricted to the supply of space without accompanying services.
But where stand space is provided with accompanying services as a package, it will no longer be seen as a supply of land with land-related services and be taxed under the general place of supply rule, customer location, when supplied to business customers.
Supplies of the storage of goods were considered to be land-related. Under HMRC’s new policy, where a supplier grants the right to use a specific area of a UK warehouse or storage area for the exclusive use of the customer to store goods, the service will be treated as relating to land and subject to VAT in the UK.
However, where the supplier agrees to store goods but does not grant a right to a specific area for the exclusive use of the customer, this will not be seen as a land-related supply but will be treated as falling within the general place-of-supply rule.
In such cases, business customers that belong outside the UK will not be liable to UK VAT.
To date, the Revenue has not regarded the supply of access to airport lounges as a land-related service. The position will change, and VAT, if applicable, will be due in the country in which the lounge is located.
Where businesses have been treating services in accordance with HMRC’s earlier policy, they may continue to apply the treatment for a transitional period of up to three months from the date of Revenue & Customs Brief 22/12, in which the VAT changes are covered.
Businesses that wish to adopt the new treatment may do so immediately.
