Land-related services and installed and assembled goods
The purpose of this note is to provide some clarity on some overseas VAT aspects for land-related services and installed and assembled goods
Situation 1 – Italian established business provides land-related services
Italian Co is an Italian established company that provides building services in the UK Co). Italian Co does not have a UK VAT establishment. Instead, it moves from one building site to another, without ever spending more than 12 months at a site.
Treatment of Italian Co’s land-related sales
The rule for UK land-related services is that the place of supply is in the UK. Consequently, the land-related service is outside of the scope of Italian VAT (IVA), so SpA must not include IVA on its invoice. UK Co accounts for the VAT using the reverse charge mechanism.
Treatment of Italian Co’s land-related purchases
In order to conduct its business in the UK, Italian Co needs to buy some bricks from Brick Ltd. The place of supply for the bricks follows the normal rules (and is in the UK), which means that Brick Ltd needs to include VAT on its invoice the Italian Co (because the bricks never leave the UK). In this case. Italian Co doesn’t have a UK VAT registration, so it recovers the VAT on the bricks via the EU VAT refund scheme.
Situation 2 – French established business provides UK installed and assembled goods service
French Co is a French company that fits out shops in the UK for Shop Ltd. French Co does not have a UK VAT establishment. Instead, it moves from one shop to another, without ever spending more than 12 months at a shop. The French Co has two choices for its installed and assembled goods service:
- register for VAT in the UK; or
- take advantage of the EU simplification agreement.
Treatment of French Co’s Installed and assembled goods sales
For various reasons, French Co decides not to take advantage of the simplification agreement and decides instead to register as an NETP in the UK. This means that it invoices from the NETP using the NETPs UK VAT registration number and includes VAT on its invoices.
Treatment of French Co’s Installed and assembled goods purchases
French Co buys some glue from Glue Ltd. Glue Ltd invoices French Co and includes VAT on the invoice because the glue never leaves the UK. French Co can’t recover the VAT through the EU refund scheme (it’s not allowed to because it has a UK VAT registration). So, the only way that SpA can recover the VAT is by putting it through its UK NETP.
The important thing here is that Glue Ltd does not put French Co’s TVA (French VAT) number on the invoice. If it does this and there’s an HMRC inspection, there will be problems. We have encountered this in the past and managed to persuade HMRC to accept the invoices, but it’s far simpler if the UK supplier (in this case Glue Ltd) does not include French Co’s TVA number on the invoice, or better still includes the NETPs UK VAT number on the invoice.
Situation 3 – Spanish established business provides both UK land-related services and UK installed and assembled goods services
In this case, Spanish Co provides both land-related services and installed and assembled goods services to UK Ltd. As with situation 2, Spanish Co decides to register for VAT in the UK for its installed and assembled goods service.
Let’s look at the land-related services side of things. There is a problem, in that Spanish Co can’t recover VAT on its purchase of bricks through the EU VAT refund scheme (because it has a UK VAT registration). Consequently, the only way it can recover its VAT is by putting the invoices through its UK NETP. But, this will look odd, because the land-related sales will rest with the Spanish Co while the purchases rest with the NETP. Something looks not right – because the purchases in the NETP are not matched by sales in the NETP. But it’s the only way that Spanish Co will be able to recover its VAT.
Situation 4 – As for situation 3, but the Spanish Company has a VAT registered UK branch
If Spanish Co has a VAT registered UK branch it has a UK establishment for VAT purposes. This complicates matters because one has to consider if it is Spanish Co’s UK establishment or Spanish Co’s Spanish establishment that is closest to the supply. In this context “closest” means the establishment that is most involved with making the supply.
- If the Spanish establishment is “closest” to the supply, then the situation is exactly the same as situation 3.
- If the UK establishment is closest to the supply, then everything gets invoiced to and from the UK branch, so there are no problems. VAT is always charged by the branch and recovered by the branch.
Land-related services and installed and assembled goods […]