Place of supply of services

A case was recently heard by the Upper Tribunal relating to the place of supply of services made by the Appellant, Mandarin Consulting Ltd, who provided career coaching to students of Chinese origin. In a previous ruling by the First-Tier Tribunal, it was concluded that the supplies constituted consultancy services as opposed to that of education. As such, the place of supply was determined to be supplied where the recipient belongs.

Originally the Appellant entered into contracts directly with the students studying in the UK, however from July 2016 contracts were instead held with the parents of these students who were almost exclusively based in mainland China. After this change, it was agreed that the services were outside the scope of UK VAT by way of being provided to those whose address was in China. The treatment of services made prior to July 2016 was disputed however with Mandarin Consulting contending that, despite the students attending UK Universities, their permanent address should be considered to be China and not the UK. It was ruled that, as Mandarin Consulting had not performed sufficient checks to establish where its customer resided, HMRC’s assessment that the supplies were subject to UK VAT was upheld in the absence of evidence that the recipient was established outside the UK.

Determining where a supply takes place for VAT purposes, and therefore where VAT is due, can often be confusing due to the variance in treatment in accordance with the status of the recipient, in addition to the myriad exceptions to the general rule. An example of this can be seen in this instance as prior to the Mandarin Consulting case reaching the Upper Tribunal, the nature of the services themselves were considered in detail due to the impact this would have on the determining place of supply. Therefore, it is important to establish at the earliest opportunity where VAT is due on a supply of services. To gain clarity in this regard and ensure you or your client are accounting for VAT correctly on your supplies of services, please contact one of our expert consultants on our free VAT helpline today.

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