VAT and services provided abroad!

Let's break down this tax area about VAT (Value Added Tax) on services provided abroad.

The Scenario:

A UK-based company is hired to install equipment for a US business. The US business has a parent company in the UK and wants the invoice sent there. The UK company needs to know if they should charge VAT on their bill.

Key Concepts:

* Place of Supply: The location where the service is considered to be provided for VAT purposes. This determines whether VAT is charged.

* Business-to-Business (B2B) Supply: A transaction where one business provides services to another business.

* Fixed Establishment: A place where a business has sufficient resources (staff and equipment) to receive and use services.

The Analysis:

* General Rule: For B2B supplies, the "place of supply" is usually where the customer is located. In this case, the customer is the US business, so the service is generally considered to be supplied in the US.

* Who is the Customer? The article emphasizes that it's crucial to identify who the customer is. Just because the UK parent company wants the invoice doesn't mean they are the customer for VAT purposes.

* Fixed Establishment Matters: If the US business has a "fixed establishment" in the US (which it does, as it has a physical presence), then the place of supply remains the US, even if the invoice goes to the UK parent.

* Invoice Address is Irrelevant: The article clarifies that the address on the invoice doesn't determine who the customer is for VAT purposes.

The Conclusion:

The UK company should not charge VAT on the invoice because the place of supply is the US. The fact that the invoice is sent to the UK parent company doesn't change this.

In simpler terms:

Think of it like this:

* Where is the work being done? The installation is happening for the US business in the US.

* Who benefits from the service? The US business is the one receiving and using the equipment.

* Where does the customer operate? The US business has its own operations (a fixed establishment) in the US.

Because the work is being done for a US business with its own operations in the US, the UK company treats it as a service provided in the US and doesn't charge UK VAT.

Important Note: This is just a summary of the article's advice. Tax laws can be complex, and it's always best to consult with a tax professional for specific situations. The article also provides links to further resources on HMRC's guidance.