VAT – cross border supplies post-Brexit
It is often easy to assume that one only has to pay UK VAT if one lives in the UK but UK VAT is often paid by individuals, trustees and companies who are resident outside the UK but use the services of professionals who are based in the UK. The extent to which VAT is or is not chargeable has changed as a result of Brexit and the end of the transition period on 31 December 2020. Here, we consider the new post-Brexit VAT position.
Of course, over the last few months we’ve seen the attention-grabbing headlines of European travel changes, pet passports and the like, and whilst the news is full of the changes to the movement of goods, there is also a subtle but important change to the VAT treatment of the supply of services. From a UK supplier's perspective an EU customer is now treated much as a customer in the US or some other non-EU country would be treated. In summary that means supplies to business customers, subject to various exceptions, continue not to attract VAT. There is even better news for EU non-business customers in that services from UK professionals will no longer attract VAT (subject, of course, to various exceptions – most noticeably UK land-related services).
Let's consider the position of Mrs Jones, a senior banking executive who has been living in Frankfurt since June 2016 and who owns the following UK assets:
- Cash in a UK bank account that may be used to buy a development site in England in the name of either Jones Ltd, a company incorporated, centrally managed and controlled and therefore tax resident in Jersey or Immobilen GmbH (which is German tax resident
- A holiday home in the Lake District (entirely used by Mrs Jones and her family)
- A portfolio of shares in UK limited property investment companies.
Mrs Jones is tired of subsidising her son and wants to see him married off.
She incurs a number of professional fees in relation to the above and is pleasantly surprised that one of the invoices from her UK tax advisor for submission of her January tax return is not subject to VAT.
A summary of the possible VAT invoices issued: (i) on or before 31 December 2020; and (ii) on or after 1 January 2021, in respect of the professional services Mrs Jones has used, are shown below:
|Description of service (all suppliers are based in the UK)||31 December 2020||1 January 2021||Comment|
|Advice by property consultants to Jones Ltd regarding feasibility of buying property in the UK||No UK VAT||No UK VAT||The general B2B rule is the supply takes place where the customer belongs. Land-related services are an exception to this rule meaning that the place of supply is deemed to be the UK with UK VAT being charged. HMRC guidance indicates that as this doesn’t relate to a specific site the service is not a land-related service and the general B2B rule applies, i.e. no UK VAT.|
|Advice by architects to Immobilen GmbH regarding feasibility of using a sustainable earth house construction technique in respect of a specific site in Cornwall||UK VAT||UK VAT||B2B rule displaced as the service relates to UK land, i.e. the supply takes place in the UK and so UK VAT is charged.|
|Property investment portfolio advice to Immobilen GmbH||No UK VAT||No UK VAT||B2B rule applies as the service only indirectly relates to land, but Immobilen GmbH needs to consider the German VAT reverse charge.|
|Fees charged to Mrs Jones for obtaining planning consent in the Lake District||UK VAT||UK VAT||B2C – the general rule is that the place of supply is where the supplier belongs.|
|Accounting and tax advice charged to Mrs Jones' son who lives in the USA||No UK VAT||No UK VAT||The B2C general rule is altered for recipients who belong outside the EU here the service is provided by consultants, lawyers or accountants (and doesn’t relate to UK land).|
|Accounting and tax advice charged to Mrs Jones||UK VAT||No UK VAT||The B2C general rule from 1 January 2021 has been altered so that for all recipients who belong outside the UK, where those services are supplied by consultants, lawyers, accountants or similar, there is no UK VAT.|
|Matchmaking services to Mrs Jones in respect of her son||UK VAT||UK VAT||This is a B2C service which is neither a consultancy service nor the provision of information and so continues to be within the normal B2C rules (Gray & Farrer International LLP  UKFTT 684).|
Private client customers living in the EU may be more likely to query their UK VAT invoices, so suppliers need to think carefully and ask themselves certain key questions:
- Where does my customer belong? Do I have evidence of this?
- Who am I supplying? – a private individual or someone in business
- What am I supplying? – in light of Gray & Farrer - does it have intellectual gravitas?
Elizabeth Small is a Partner in the Tax team.