Section 76 Schedule 36: Vat: Place of Supply of Services Etc
Summary
1.Section 76 and Schedule 36 implement the first phases of changes to the place of supply rules covered by the amendment to Directive 2006/112/EC made by Directive 2008/08/EC by incorporating all place of supply of services rules into a new section 7A of and Schedule 4A to the Value Added Tax Act 1994 (VATA). This legislation will have effect on 1 January 2010 (where not specifically stated), 1 January 2011 and 1 January 2013.
Details of the Schedule
2.Paragraph 2 makes a consequential amendment to section 6(14A) of VATA arising from the amendment made to section 7 of VATA by paragraph 2 of Schedule 36.
3.Paragraph 3 amends section 7 of VATA so that the section only applies to the place of supply of goods.
4.Paragraph 4 amends VATA by inserting after section 7 a new section 7A to determine the place of supply of services.
5.New section 7A(1) provides that new section 7A determines the country in which services are supplied for the purpose of VATA.
6.New section 7A(2) determines the place of supply for services.
7.New section 7A(3) determines the place of supply for the right, option or priority with respect to a supply of services.
8.New section 7A(4) defines the term a ‘relevant business person’ for the purposes of VATA.
9.New section 7A(5) provides that subparagraph 7A(2) has effect subject to Schedule 4A to VATA.
10.New section 7A(6) provides that HM Treasury may by Order amend section 7A(4) of and Schedule 4A to VATA or make provision for exceptions to section 7A(2).
11.New section 7A(7) provides that an order under subsection (6) may include incidental, supplemental, consequential and transitional provisions.
12.Paragraph 5(2) substitutes section 8(1) and (2) of VATA so that where the circumstances in section 8(2) apply, services received by a relevant business person who belongs in the UK from a person who belongs in a country other than the UK are treated as if they were a taxable supply made in the UK by the recipient in the course or furtherance of a business carried on by the recipient.
13.Paragraph 5(3) amends section 8 of VATA by inserting a new subsection (4A) so that section 8(1) does not apply to supplies described in Schedule 9 of VATA.
14.Paragraph 5(4) amends section 8(5) by removing reference to Schedule 5 of the VATA and provides that HM Treasury may, by Order, amend new subsection 4A by altering the descriptions of services within that subsection.
15.Paragraph 5(5) removes section 8(6) of VATA.
16.Paragraph 5(6) amends section 8(7) by removing reference to Schedule 5 of the VATA and provides that HM Treasury may by Order amend new Section 8(4A) by making further provisions to that subsection as they see fit.
17.Paragraph 5(7) amends section 8(8) of VATA by replacing “addition to or variation of that Schedule” with “amendment of subsection (4A) and “the Schedule” with “that subsection”.
18.Paragraph 6 substitutes section 9 of VATA which determines, for the purposes of section 7A, Schedule 4A and section 8 of VATA whether a person who receives a supply or makes a supply (including a supply treated as made by virtue of the reverse charge mechanism in section 8) belongs in one country or another.
19.Paragraph 7 makes consequential amendments to section 43 of VATA and replaces references to Schedule 5 with the new section 7A(2)(a).
20.Paragraph 8 amends section 96 of VATA (interpretation) to provide that the term relevant business person has the meaning given by section 7A(4).
21.Paragraph 9 adds orders made under section 7A(6) to the list of Orders requiring Parliamentary approval.
22.Paragraph 10 amends Section 97A to apply to supplies of services which become treated as made in the UK by virtue of any order made under section 7A(6).
23.Paragraph 11 inserts a new Schedule 4A to VATA which deals with special rules in relation to the place of supply of services.
24.Paragraph 1 of Schedule 4A provides that a supply of services made in relation to land is to be treated as made in the country where the land is situated.
25.Paragraph 2 of Schedule 4A provides that a supply of services of passenger transport is to be treated as made in the country and/or countries in which the transportation takes place, in proportion to distance covered.
26.Paragraph 3(1) and (2) of Schedule 4A provides that the place of supply of services consisting of the short-term hire of transport is the country in which the transport is put at the disposal of the person by whom it is hired but this rule is qualified by
paragraph 3(3) which provides that where, under the general rule in section 7A, the place of supply of such services would be treated as occurring in the UK, then, to the extent that they are so used and enjoyed, the services will be treated as made in the country in which they are used and enjoyed if that country is not a Member State; and
paragraph 3(4) which provides that where, under the general rule in section 7A, the place of supply of such services would be treated as occurring in a country that is not a Member State, then, to the extent that they are so used and enjoyed, the services will be treated as made in the UK if they are used and enjoyed in the UK.
27.Paragraph 4 of Schedule 4A provides that the place of supply of cultural, artistic, sporting, scientific, educational and entertainment or similar services is the country where the services are physically carried out.
28.Paragraph 5 of Schedule 4A provides that general restaurant and catering services are to be treated as occurring in the country where they are physically carried out, other than those services that are provided for by paragraph 6 of Schedule 4A.
29.Paragraph 6 of Schedule 4A provides that the place of supply of restaurant and catering services provided on board a ship, aircraft or train in connection with the transportation of passengers within the EC is the country in which the relevant point of departure is located.
30.Paragraph 7 of Schedule 4A provides an exception from the general place of supply rules in section 7A of VATA in relation to supplies comprising the hire of goods (other than a means of transport) so:
where, under the general rule in section 7A, the place of supply of such hire of goods would be treated as occurring in the United Kingdom, then, to the extent that they are so used and enjoyed, the services will be treated as made in the country in which they are used and enjoyed if that country is not a Member State; and
where, under the general rule in section 7A, the place of supply of such hires would be treated as occurring in a country that is not a Member State, then, to the extent that they are so used and enjoyed, the services will be treated as made in the UK if they are used and enjoyed in the UK.
31.Paragraph 8 of Schedule 4A provides an exception from the general place of supply rules in section 7A of VATA in relation to the telecommunications services defined in paragraph 8(2) and radio or television broadcasting services so:
where, under the general rule in section 7A, the place of supply of such services would be treated as occurring in the UK, then, to the extent that they are so used and enjoyed, the services will be treated as made in the country in which they are used and enjoyed if that country is not a Member State; and
where, under the general rule in section 7A, the place of supply of such services would be treated as occurring in a country that is not a Member State, then, to the extent that they are so used and enjoyed, the services will be treated as made in the UK if they are used and enjoyed in the UK.
32.Paragraph 9 of Schedule 4A provides an exception from the place of supply rules in section 7A(2)(a) of VATA in relation to electronically supplied services to a relevant business person (examples of which are given in paragraph 9(3) provided, as paragraph 9(4) makes clear, they are more than a mere communication between a supplier and customer by electronic mail) so:
where, under the rule in section 7A(2)(a), the place of supply of such services would be treated as occurring in the UK, then, to the extent that they are so used and enjoyed, the services will be treated as made in the country in which they are used and enjoyed if that country is not a Member State; and
where, under the general rule in section 7A(2)(a), the place of supply of such services would be treated as occurring in a country that is not a Member State, then, to the extent that they are so used and enjoyed, the services will be treated as made in the UK if they are used and enjoyed in the UK.
33.Paragraph 10 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that supplies made to a person who is not a relevant business person via intermediaries is treated as made in the same country as the related supply.
34.Paragraph 11 of Schedule 4A provides for an exception from the general rule in section 7A(2b) so that supplies comprising the transportation of goods made to a person who is not a relevant business person occur in the country in which the transportation takes place in proportion to the distances covered but this exception does not apply where the transportation begins in one Member State and ends in another.
35.Paragraph 12 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that supplies made to a person who is not a relevant business person that comprise a transportation of goods that begins in one Member State and ends in another are treated as made in the Member State in which the transportation begins.
36.Paragraph 13 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that supplies made to a person who is not a relevant business person that comprise ancillary transport services are treated as made where the services are physically performed.
37.Paragraph 14 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that supplies made to a person who is not a relevant business person that comprise the valuation of, or carrying out of work on, goods are treated as made where the services are physically performed.
38.Paragraph 15 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that a supply comprising electronically supplied services as described in paragraph 9 of Schedule 4A by a person who belongs in a country which is not a Member State (other than the Isle of Man) to a person (“the recipient”) who, is not a relevant business person and belongs in a Member State, will be treated as made in the country in which the recipient belongs.
39.Paragraph 16 of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that a supply falling within one of the descriptions listed in paragraph 16(2) made to a person (“the recipient”)who is not a relevant business person and belongs in a country which is not a Member State (other than the Isle of Man), will be treated as made in the country in which the recipient belongs.
40.Paragraph 12 omits Schedule 5 to VATA (services supplied where received).
41.Paragraph 13 is a consequential amendment to ensure the continuation of the special place of supply rule in Article 5 of the Value Added Tax (Tour Operators) Order 1987 (S.I. 1987/1806) in relation to supplies of services by tour operators.
42.Paragraph 14 provides for the times from which the changes made by the Schedule have effect.
43.Paragraphs 15 and 16 amend Schedule 4A to VATA in relation to supplies made on or after 1 January 2011 by omitting paragraph 4 of Schedule 4A and inserting into that Schedule paragraphs 9A and 14A.
44.Paragraph 9A of Schedule 4A provides an exception from the place of supply rule in section 7A(2)(a) of VATA so that services in respect of admission to cultural, artistic, sporting, scientific educational, entertainment or similar events and ancillary services relating to the admission to such event made to a person who is a relevant business person will be treated as made in the country in which the events actually take place.
45.Paragraph 14A of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that a supply comprising cultural, artistic, sporting, scientific, educational, entertainment or similar activities (and ancillary services relating to such activities) which is made to a person who is not a relevant business person is to be treated as made in the country in which the activities take place.
46.Paragraphs 17 and 18 amend Schedule 4A to the VATA in relation to supplies made on or after 1 January 2013 by inserting into that Schedule paragraph 13A.
47.Paragraph 13A of Schedule 4A provides for an exception from the general rule in section 7A(2)(b) so that a supply comprising the “long-term hire” of transport to a person who is not a relevant business person is treated as occurring in the country where the recipient belongs, (but there is an exception from this rule in relation the long-term hire of a pleasure boat).
48.Paragraph 19 introduces a transitional provision to avoid double taxation on services which are subject to the changes covered by this Schedule.
Background Note
49.This section and Schedule make changes to the rules governing the place of supply for VAT purposes.
50.These changes are required to implement the first phases of changes in the VAT Place of Supply of Services Directive (Directive 2008/08/EC) into UK law. These changes were agreed as part of the VAT Package of legislation adopted in February 2008.
51.From 1 January 2010 the new general rule for the place of supply of services will tax business to business supplies of services at the place where the customer is established and no longer at the place where the supplier is established, as is the case at present.
52.For business to consumer supplies of services, the general rule for the place of supply will continue to be the place where the supplier is established.
53.As now, there are exceptions to the general rule for certain services, with a view to achieving taxation in the place of consumption. In the main these will be implemented on 1 January 2010, with further changes being introduced from 1 January 2011 and 1 January 2013.
54.This legislation includes provisions implementing the following European Community legislation: Directive 2008/08/EC. A Transposition Note setting out how the Government will transpose into UK law the main elements of this Directive is annexed below.
Annex A.Transposition Note: Articles 2(1), (6) and (7), 3 and 4 of Directive 2008/08/EC: Amending Chapter 3 of Title V, Section 1 of Chapter 1 of Title XI and Article 196 of Directive 2006/112/ EC as regards the place of supply of services
A table setting out how the various Articles are transposed into UK law is below.
The proposals for the changes to the place of supply of services for supplies to business customers contained in Directive 2008/8/EC were originally submitted to the EU Scrutiny Committee in January and February 2004 (EM and SEM 5051/04) with a RIA. The proposals were passed by the House of Commons on 16 March 2004 and the House of Lords on 25 May 2004. Subsequent amended proposals were submitted to the Committee on 30 September 2005 (EM 11439/05) in relation to supplies to business and private consumers. These were passed by the House of Commons on 28 February 2006 after a standing committee debate on 16 February 2006 and by the House of Lords on 15 March 2006.
The proposals were adopted by Finance Ministers in the February 2008 ECOFIN
References to Articles in the table below relate to the amended Articles of Directive 2006/112/EC.
| Article | Objective | Implementation |
|---|---|---|
| (of the VAT Act 1994) | ||
| Article 43 | Article 43 provides that a taxable person who also carries out activities or transactions that are not taxable supplies of goods or services within Article 2(1) is regarded as a taxable person in relation to all services rendered to him for the purposes of the place of supply rules and further extends the meaning of taxable person in this context to include a non-taxable legal person who is identified for VAT purposes in a Member State. | Section 7A(4) |
| Article 44 | Article 44 provides that the general place of supply rule for services made to business customers is where the customer belongs. | Section 7A(2)(a) |
| Article 45 | Article 45 provides that the general place of supply rule for services made to non-business customers is where the supplier belongs. | Section 7A(2)(b) |
| Article 46 | Article 46 provides that the place of supply of services by intermediaries to non-business customers is where the supply being arranged takes place. | Schedule 4A, paragraph 10 |
| Article 47 | Article 47 provides that the place of supply of services connected with land is where the land is situated. | Schedule 4A, paragraph 1 |
| Article 48 | Article 48 provides that the place of supply of passenger transport is where the transport takes place, proportionate to the distances covered. | Schedule 4A, paragraph 2 |
| Article 49 | Article 49 provides that the place of supply of the transport of goods to non-business customers, other than the intra-Community transport of goods, is where the transport takes place, proportionate to the distances covered. | Schedule 4A, paragraph 11 |
| Article 50 | Article 50 provides that the place of supply of intra-EC transport of good to non-business customers is the place of departure. | Schedule 4A, paragraph 12 |
| Article 51 | Article 51 defines the meaning of the term "intra-EC transport of goods" and the term "the place of departure". | Schedule 4A, paragraph 12 |
| Article 52 | Article 52 provides that Member States need not apply VAT on the element of intra-EC transport of goods to non-business customers that takes place over waters that do not form part of the Community. | Schedule 4A, paragraph 12 |
| Article 53 | Article 53 provides that the place of supply of services and ancillary services related to cultural, artistic, sporting, educational, entertainment and similar services as well as organising such activities is where the activities are physically carried out. | Schedule 4A, paragraph 4 |
| Article 54 | Article 54 provides that the place of supply of ancillary transport services and valuation and work on goods supplied to non-business customers is where the services are physically carried out. | Schedule 4A, paragraphs 13 and 14 |
| Article 55 | Article 55 provides that restaurant and catering services, other than those performed on board ships, aircraft, or trains during a section of transport within the Community, are supplied where physically carried out. | Schedule 4A, paragraph 5 |
| Article 56 | Article 56 provides that the short time hire of a means of transport is supplied where the means of transport is actually put at the disposal of the customer. | Schedule 4A, paragraph 3 |
| Article 57 | Article 57 provides that the place of supply of restaurant and catering services onboard ships, aircraft or trains during a section of passenger transport within the Community is at the point of departure of the passenger transport. | Schedule 4A, paragraph 6 |
| Article 58 | Article 58 provides that the place of supply of electronically supplied services supplied to non-business customers that belong in a Member State by a taxable person that belongs outside of the Member States is the place where the customer belongs. | Schedule 4A, paragraph 15 |
| Article 59 | Article 59 provides that the place of supply of certain specified intangible services when supplied to non-business customers that belong outside of the Member States is where the customer belongs. | Schedule 4A, paragraph 16 |
| Article 59a | Article 59a allows Member States discretion, in relation to supplies whose place of supply is governed by Articles 44 (supplies to business customers), 45 (supplies to non-business customers), 56 (short-term transport hires) and 59 (intangible services to non-business customers (but excluding electronically supplied services)) and which, under those rules, would otherwise be treated as occurring in the Member State concerned or outside the Member States, to be treated as occurring where they are used and enjoyed if that use and enjoyment occurs in the Member State concerned or outside the Member States as appropriate. | Schedule 4A, paragraphs 3, 7, 8 and 9 |
| Article 59b | Article 59b requires Member States to treat telecommunications services and radio and television broadcasting services supplied by taxable persons belonging outside the Member States to non-business customers belonging in the Member State concerned as occurring in that Member State to the extent that such services are used and enjoyed there. | Schedule 4A, paragraph 8 |
| Article 192a | Article 192a states that a supplier that has a fixed establishment within the territory of the Member State where tax is due on a supply shall be regarded as not established in that Member State if the fixed establishment does not intervene in that supply. | Section 9 |
| Article 53 (from 1 January 2011) | Article 53 introduced on 1 January 2010 is modified from 1 January 2011 so that it governs only the place of supplies comprising admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events made to business customers and fixes the place of such supplies as the place where such events actually take place. | Schedule 4A, paragraph 9A (from 1 January 2011) |
| Article 54 (from 1 January 2011) | Article 54 is modified from 1 January 2011 so that, in addition to the services governed by it with effect from 1 January 2010, it will also govern the place of supply of cultural, artistic, sporting, educational, entertainment and similar activities supplied to non-business customers by fixing their place of supply as the place where those activities actually take place. | Schedule 4A, paragraph 14A (from 1 January 2011) |
| Article 56 (from 1 January 2013) | Article 56 introduced on 1 January 2010 is modified from 1 January 2013 so that the place of supply of the hire (other than a short-term hire) of a means of transport to a non-business customer is where the customer belongs, unless it is a pleasure boat; the place of supply of such pleasure boat hires will be the place where it is actually put at the disposal of the customer if this takes place at the supplier's place of business or fixed establishment. | Schedule 4A, paragraph 13A (from 1 January 2013) |
| Article 196 (from 1 January 2010) | Article 196 provides that business customers and non-business customers that are identified for VAT purposes must account for VAT chargeable on supplies made to them by suppliers who do not belong in the same Member State as them if the supply is treated as made in the Member State where the customer belongs by virtue of Article 44. | Section 8 |
