VAT and International Trade

Place of supply

VAT is chargeable only on UK supplies so determining the place of supply is critical. Where both customer and supplier are UK based the position is straightforward. However, where one or other is overseas based determining the VAT status can be complicated. Examples that may help :-

  • Overseas visitor rents a room, buys goods to take away, undertakes an educational course on campus, attends a conference etc. – in all cases there is a supply for VAT purposes within the UK
  • Overseas (non-EU) company funds research activity – in this instance the supply is not the research work but the final report and, as this is delivered outwith the EU, the place of supply is company location.

Out with the scope

Certain activities are deemed to be outwith the scope of VAT. It is important to recognise that this differs from being exempt from VAT. The latter is recognised as a supply of goods or services that are specifically exempt whereas the former is a non-taxable activity irrespective of the nature of the supply.

Acquisition VAT

When goods are purchased from a supplier in another EU country VAT must be accounted for at the rate applicable if the supply were made within the UK. For example, equipment imported from another EU country that would attract standard rated VAT if supplied in the UK requires VAT to be remitted on the full purchase invoice price. Similarly, books purchased would retain their zero rated status.

Reverse charge

The reverse charge operates in a similar way to EU acquisition VAT but applies to services. Effective 1st January 2010 all services will be deemed to be supplied where the customer is located. This means that services procured from within the EU that previously did not attract VAT may now be liable.

Supplies to look out for include :-

  • Digitised and electronic supplies
  • Staff seconded from overseas
  • Consultancy

 

Any supply received under the reverse charge regulations will result in VAT being accounted for at the rate of VAT applicable if the supply were made in the UK.

 

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