I had this VAT visit for a client - a film maker, he goes to the US for some pre-production meetings and to make the movies. He does the post production in the UK, where he hires some special equipment for his work. (the hire fee is a cost for him). As far as I checked the HMRC’s website and Business link I believed that the exports are 0 rated.
The inspector said that he should probably pay VAT for the work he has done in the UK, for his US client and I do not agree with this as I believe this is an 'export'.
I am putting this to the more experienced members, am I right in believing so? Could you please point me to some reference materials?
many thanks in advance
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Replies (7)
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Place of supply rules
This is the supply of a service, and the general rule is that the service takes place where the customer belongs. It doesn't matter at all where the service is actually carried out.
This is clearly a B2B serivce, not that that is particularly relevant as the customer belongs in the USA.
The above link covers a number of exceptions to the general rule, starting at 5.5 and then in sections 6 - 12 for the most common exceptions.
It's no use the HMRC officer saying that your client "probaby" should be paying VAT on the work done in the UK - he has to show exactly why the general place of supply rule does not apply and back it up with proof.
Place of supply rules
As you had a VAT visit, I assume your client is VAT registered and if so the supply to him of services by a UK VAT registered business should be subject to VAT at 20%. The onward supply by your client to his American customer is not chargeable with VAT as the Place of Supply is deemed to be where the recipient is established (USA). So the VAT officer appears to be correct in what he isa saying but overall there is no VAT cost to anyone.
You're confusing me, Shaun
You say the Officer appears to be correct (saying that VAT should be chargeable to the US customer) but in your own words say no VAT should be charged. And of course, if the Officer were correct (which he is not) there would be a VAT cost to someone - the US customer.
The original post
is perhaps a little ambiguous.
"The inspector said that he should probably pay VAT for the work he has done in the UK, for his US client"
Does this mean that the client should pay VAT on the supply to the US customer? I think not.
Or does it mean that the client should pay VAT on supplies made to him in the UK in connection with the contract? Clearly yes, but tecoveraable as input tax. I think that's what Shaun is referring to. But there again I might be wrong.
VAT
Just to clarify- the supply to your client by the UK supplier should be subject to the standard rate of VAT and the supply by your client to its American client should be treated as outside the scope with credit (Zero Rated).
When was the supply?
Wait just a moment though. I'm not sure that it's a black and white "he's just plain wrong".
Prior to 1 January 2011 "services relating to entertainment activities" B2B were deemed supplied in the UK.
Both pre and post 1 January 2011 B2B electronically supplied services are deemed supplied in the UK to the extent that they are effectively used and enjoyed in the UK. Modern post-production services may very well be considered to be supplied electronically. On what is the filme edited? How is the final version of the film sent to the US customer? And where is it then shown?
As cloudcounter says though, the first question to ask HMRC is why do they think VAT should have been charged. Of course, they can assess and if the assessment goes to appeal the onus is on you to show that it was correct not to charge VAT.
many thanks to all
have not yet received VAT man's letter, it was only a verbal mention during the visit/. I need to write to him probably to make sure we both understand the same
Thanks George, good point, will find out what media is used to supply the film.