Change to HMRC policy in respect of the place of supply for B2C supplies of a professional, technical and intangible nature
HMRC appear to have changed their policy regarding B2C supplies of certain intangible services, such as the services of accountants, consultants, lawyers, and similar.
UK VAT legislation currently distinguishes between supplies made to private individuals within the EU and supplies made to private individuals outside of the EU. Paragraph 16 of Schedule 4A lists the relevant services and states that the place of supply of these services is where the customer belongs, provided the customer belongs outside of the EU, so no UK VAT is chargeable. However, for supplies to customers based within the EU, UK VAT would be chargeable on the basis that this is a B2C supply of services to another EU country, which is subject to the general place of supply rules.
Following Brexit, although the legislation has not been changed, HMRC have updated VAT Notice 741A to remove this distinction. The notice states that when you provide such services, these services are now deemed to be supplied where your customer belongs so will always be outside the scope of UK VAT.
Interestingly, if the supply is deemed to be supplied where the customer belongs it raises the question as to whether there would then be a requirement for the supplier to register for VAT in the EU country where their customer belongs. We expect that this will be unlikely on the basis that we presume this is intended as an easement which is intended to put people supplying private individuals in the EU on a level footing with people supplying private individuals outside of the EU; though it remains to be seen whether HMRC provide further comment on this aspect of the policy change, and what any subsequent change to the law says.
If you wish to discuss this matter, or other VAT concerns further, please contact Stephen Patey, Senior Manager, on 020 7969 5684 or via email at firstname.lastname@example.org.