The ‘place of supply’ is the place where a supply is made and where VAT is charged and paid. The general rule for B2B (business to business) supply of services is that the services are supplied where the customer belongs.

So, where the University receives services from a supplier which is a business based outside the UK, the place of supply would generally be here in the UK and Vat must be accounted for under the “Reverse Charge Mechanism” to HMRC. The overseas supplier would not charge VAT on its invoice to the University but the University accounts for the VAT in its tax return.

The reverse charge VAT is applied in the same way as if the services from overseas supplier have been purchased in the UK, and the same rates of VAT will apply. For example, many advertising services received from UK suppliers are charged with zero rate VAT, where such services are received from overseas suppliers, the University will account for the reverse charge at zero rate with the overall effect of not having to pay VAT of the qualifying advertising services HMRC. VAT wouldn’t be paid just as if a UK supplier supplied them.

If the overseas business charges the University VAT on their invoice for services provided, reverse charge VAT will still be payable in the UK, on the total invoice value, including the overseas VAT.

Common services received from overseas that would attract the reverse charge include, overseas recruitment agents’ services, consultancy services, advisory services, and software licence purchases.

On the other hand, there are supplies that wouldn’t attract the reverse charge, they include hotel accommodation abroad, admission to an event or exhibition overseas, marking or other examination services, subsistence, car hire etc.

Scenarios in which service received from overseas suppliers would attract reverse charge.

Overseas agent fees

These agents help to recruit students on the University’s behalf. Where an agent based outside the UK recruits’ students from abroad for the University and charges for their serves, ideally the agent would not charge VAT on their invoice, but the University must pay the VAT at the standard rate to HMRC through the reverse charge, as agent recruitment services are vatable when supplied by UK based business.

Overseas consultancy fee

As this is subject to VAT here in the UK when the service is supplied by a UK supplier, if the University is paying an academic or consultant to undertake work on its behalf and they are resident overseas, reverse charge VAT will be due on the value of the payment unless that person would be paid as an employee.

Legal services fees

Fees for legal services carried out from a supplier from abroad would be subject to the reverse charge.

Sub-contracted service fees

Where such services would be subject to VAT if supplied in the UK, the transaction would be subject to the reverse charge when service is supplied by overseas business. An example of this transaction is laboratory testing services purchased from overseas.

Software licences

Generally, software licences purchased from overseas businesses would be subject to the reverse charge, just as they would be subject to VAT in the UK. However, reverse charge may only be applied depending on where the service is ‘Use and enjoyed’ (consumed). So, if used by the University in the UK (which is most likely), the University should apply the reverse charge. If used outside the UK, it might be the situation that tax will be due overseas

Exhibition stand fees

Exhibition stand space is normally provided with accompanying services as a package, where such services are supplied in the UK VAT will be due. This means that the reverse charge VAT will apply on exhibition stands when supplied from outside the UK. It is worth noting that exhibition stands are longer seen as a supply of land, which is normally exempt for VAT. Exhibition stands normally contain other services hence the reason they are not treated as mere supply of land.

Services that might not require the reverse charge VAT

• Services relating to land – expect VAT to be charged in country where land located.
• Passenger transport – specific rules, depends on facts.
• Right of admission to cultural/educational events including conference, seminar and course fees – expect VAT to be charged in country where event is located.
• Catering services – VAT due where catering physically takes place.
• Hire of goods used outside the UK – expect VAT to be charged where goods are located.