Place of Supply of Services

HMRC have announced an exception to the place of supply rules regarding supplies of ‘indemnity repairs’ of tangible movable property under insurance contracts which will come into effect as of the 1st October 2016.


The place of supply rules are used to determine where a supply of services is deemed to be made and therefore, where that supply is liable to VAT.  Under current legislation, services of this nature supplied to business customers are treated as being supplied where the customer belongs for VAT purposes.  However, as of October 2017, an exception to the usual place of supply rules will be introduced whereby supplies of repairs to moveable goods (carried out under the terms of insurance contracts) will be liable to VAT where they are effectively used and enjoyed.


The aim of this legislation is to ensure that insurers located outside the VAT territory of the EU do not avoid an irrecoverable VAT charge that would be incurred by UK based insurers, eliminating any competitive advantage obtained by their offshore counterparts.


If you or your clients provide supplies of repair outside of the UK as a result of an insurance claim, such as in relation to mobile phones or cars, the way in which VAT is accounted for on these supplies will be subject to change. To ensure the VAT treatment of these supplies takes this new exception into consideration correctly, please call our free VAT helpline to clarify your position prior to its implementation.

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