Share this content

VAT charges for EU client fixed storage??

Didn't find your answer?

We are a fulfilment business and we don't own the client's stock - pick and pack, store and despatch. For EU clients under the general rule for the place of supply of services we don;t charge VAT as where the customer belongs defines whether there is VAT chargeable or not. However, we have one client who we are going to be invoicing for a fixed storage area and I think this aspect of it may be vatable, does anyone know?

Replies (8)

Please login or register to join the discussion.

chips_at_mattersey
By Les Howard
24th Jun 2022 14:17

The grant of exclusive use of space is, I think, a land-related service. This means the place of supply is where the land is located. Unless the customer is also registered in the same country, they can only reclaim VAT using a cross-border arrangement.
If this is a regular part of your business model, you should take more formal VAT advice, so that potential clients are provided with an indication of how they might recover VAT charged.

Thanks (0)
Replying to leshoward:
avatar
By fcbmq
24th Jun 2022 15:56

It's not a regular part of our business model. We do charge all clients storage but there aren't fixed areas for any client other than this one, the activity we're doing for them is outside the norm due to a wider group opportunity.

Thanks (0)
avatar
By rmillaree
24th Jun 2022 14:17

Is it "only" the fixed storage area they are paying for - are there ANY associated services that are provided with regard to that supply or come thrown in as free.

What rate of vat would you charge a uk customer for the exact same supply ?

Thanks (0)
Replying to rmillaree:
avatar
By fcbmq
24th Jun 2022 15:54

rmillaree wrote:

Is it "only" the fixed storage area they are paying for - are there ANY associated services that are provided with regard to that supply or come thrown in as free.

What rate of vat would you charge a uk customer for the exact same supply ?


They are charged for associated labour and despatch costs which we've been advised by a VAT expert (previously for EU clients) isn't vatabe as the general rule of place of supply is where the customer is based, as we don't own the stock. However, no other clients have had a fixed storage area.
Thanks (0)
VAT
By Jason Croke
24th Jun 2022 16:48

If it is just warehousing (storage), then that is usually a land related supply, place of supply is UK, regardless of where the customer is.

If it is order fulfilment, then that is not a land related service and would fall under the default rule for services, place of supply is where the customer is, therefore outside the scope of UK VAT.

It's a bit more nuanced than that, depends on the contract, so the above is a starting position, not formal advice.

HMRC Notice 741A at section 7.3
https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#...

Services directly related to land
This rule applies only to services which relate directly to a specific site of land or buildings, that is those services derived from land and where the land is a central and essential part of the service or where the service is intended to legally or physically alter a property.

If a land related service is provided alongside other services that do not relate to land you will need to consider whether there are separate supplies or a single supply to which other services are ancillary. If there is a single supply directly related to land this treatment covers all the elements that make up the supply. If there are multiple supplies each will need to be considered on its own.
____________________

It therefore looks like the fulfilment is likely outside the scope, as you were previously advised and as you are doing for your other EU customers, but the storage appears to be a land related supply.

Thanks (1)
Replying to Jason Croke:
avatar
By fcbmq
24th Jun 2022 16:47

That's as I thought. I will get some formal advice to clarify.

Thanks (0)
VAT
By Jason Croke
24th Jun 2022 16:47

The point Les eludes to is that self-storage is automatically a standard rated supply, but is what you supply self storage?

Useful one page article here https://www.saffery.com/insights/articles/storage-facilities-and-vat

In essence you have to define what is being supplied - storage or something else - and is there a predominant supply or two separate supplies? There could be an argument here that the main supply is fulfilment and the storage is ancillary, depends on area being used against cost of fulfilment, if the storage is ancillary then the dominant supply is fulfilment, which is outside the scope of VAT..

Might be worth revisiting with the VAT expert because the client may also have to register with the HMRC Fulfilment House Due Diligence Scheme - they may already be registered seeing as they are already fulfilling sales for non-UK businesses.
https://www.gov.uk/guidance/fulfilment-house-due-diligence-scheme

Thanks (1)
Replying to Jason Croke:
avatar
By fcbmq
24th Jun 2022 17:57

Our service is to pick pack and despatch our clients products for them to their end customer. There are storage charges as a by product of this. We don't have fixed storage areas except for two clients (for every other client, their stock is put away wherever there is adequate space) - one is a UK company which is a standard rated supply, the other is this EU company which I think is also a standard supply.

Thanks (0)
Share this content