November 2009


Changes to place of supply rules could make VAT treatment more complicated

Stephen SmithStephen Smith, the Managing Director of UK Training, is concerned that the new rules regarding the place of supply for international services will not simplify the situation for everybody and could for some make the situation more complicated. His analysis of the situation for UK Training provides a note of caution for any organisation that provides a service to any other body outside the UK.

Do you know the impact that the changes will have on your business?

The current place of supply rules regarding the presentation of seminars makes it necessary for training companies to register for VAT in each of the EC countries in which they present seminars. I accept that presenting a seminar is the supply of an ‘educational service’ and not, as some people would like to construe, the supply of ‘admission to an educational event’.

I was delighted when I heard that the place of supply rules are changing for performance related services. My delight was short lived. Although the place of supply will become where the customer belongs for business customers, it will remain the place where the seminar is presented for non-business customers. We have both business and non-business customers, so we will still need to register for VAT in each of the EC countries in which we present our seminars.

My delight then turned to dismay. Why? When the changes are implemented, training companies based in one EC country will have to distinguish between the following customers:

  • business customers who belong in the same EC country;
  • business customers who belong in other EC countries;
  • business customers who belong outside the EC;
  • and, irrespective of where they belong, non-business customers.

Then, depending upon the type of customer, the training company will apply three different forms of VAT treatment. We have customers travelling from many countries throughout the world, not just EC countries, to attend our seminars.

Should all of the VAT authorities in the EC accept the argument that presenting a seminar is the supply of ‘admission to an educational event’ I will be surprised. This would take us back to square one and the supply will continue to be taxed in the country in which the seminars are presented for both business and non-business customers.

The place of supply rules for many international services, and not just performance related services, are changing. There will be a set of changes made on 1st January 2010 with further changes made on 1st January 2011. Have you studied the impact that they will have on your business? As you can see from our situation the changes will not necessarily simplify matters for you – they could become more complicated.

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