VAT on services provided ~ export or not export?

VAT on services provided ~ export or not export?

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A cameraman works on a corporate film in the UK and provides his material to a UK based editor.

The UK based producer editor cuts the material and delivers the final product to the client in Hong Kong.

Both the camerman and the editor are VAT registered and are sub-contractors to the Hong Kong based client.

As the camerman delivered his services in the UK are his services within the scope of UK VAT?

As the editor delivered his final product outside the UK are his services exempt from UK VAT?

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By ayaz786ahmd
22nd Oct 2010 13:16

Probably

 

You may get some help from the following link topic number 14.3:

 

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...

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By Euan MacLennan
22nd Oct 2010 14:08

No & Not exactly

As both the cameraman and the editor "are sub-contractors to the Hong Kong based client", their customer belongs in Hong Kong and assuming that the client is having this film made for business purposes, the general Business2Business rule for the place of supply of services will apply.  Under this rule, their services are supplied in Hong Kong, which means that they are outside the scope of VAT.  Neither should charge UK VAT on their invoices to the Hong Kong client.

Have a look at at VAT741 s.5.2.

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By Rob Fox
22nd Oct 2010 14:13

VAT on services - export or not

s.7A, VAT Act 1994 applies here for place of supply.  None of the exceptions in Schedule 4A appear to apply.

I infer that the cameraman is making a supply to the editor, in which case the VAT is chargeable as neither the supplier nor recipient are outside the UK.  If the cameraman is actually supplying the end cleint, VAT is still chargeable as the place of supply is where the customer belongs by virtue of Schedule 4A, paragraph 14A.

The editor's supply is more problematic: are they supplying goods or services?  If goods, then normal exprt zero reating would apply.  If services, the same rule at Schedule 4A, paragraph 14A applies.

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By Anne Fairpo
25th Oct 2010 16:44

All depends on the film ...

Cultural/artistic/educational services supplied to someone in business are covered by para 4 of Sch 4A which provides that, until 31 December 2010, the place of supply of such services (and services ancillary to them) is where the cultural/artistic activity is carried out - so UK VAT would apply to the services of both the camerman and the editor.  

However, there must be some question as to whether the cameraman and editor's activities on a corporate film relate to cultural, artistic or educational activity - that usually presupposes some form of performance (for example, by an actor or singer) to have taken place, or some educational activity to be included.   The nature of the corporate film being made and its content will be important here.

If not cultural/artistic/educational services then, as already noted, the cameraman's VAT treatment will depend on who he is contracted to - if the UK editor, then it's a UK VATable supply as it is a supply to a UK customer.  If to the Hong Kong client, then it is outside the scope of VAT as it is a supply to someone outside the EU.  The editor is supplied the Hong Kong client and so is outside the scope of VAT.

Just for reference, after 31 December 2010, the general rule on the place of supply of services will apply to supplies of cultural/artistic services to someone in business, so that they are considered to be supplied where the customer is located, except in the case of admissions to cultural/artistic events which remain deemed to be supplied where the event takes place (para 9A of Schedule 4A).

Note that para 14A of Schedule 4A will only apply (it doesn't come into force until January 2011) where the services are supplied to a person who is not a relevant business person - and a "relevant business person" is anyone carrying out an economic activity in any place (para 7A and Art 9 of Directive 2006/112/EC).  Unless the recipient of the services in Hong Kong is not in business - which seems unlikely as this is a corporate film - then the services are supplied to a relevant business person.   

Hope that helps.

 

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