VATREG37200 - Non-established taxable persons (NETPs): place of supply and the reverse charge

Place of supply

The normal position is that a business without UK establishment is liable to register under Schedule 1A of the VAT Act 1994 if it makes taxable supplies of any value or intends to do so in the next 30 days.

A taxable supply is a supply of goods or services made in the UK other than an exempt supply – section 4(2) of the VAT Act.

A key consideration is whether a supply takes place in the UK. An overseas business may not need to register if all the supplies in the UK are:

  • subject to the reverse charge mechanism
  • goods that are overseas at point of sale, in a low value consignment (total value £135 or less) that does not contain goods subject to excise duty, and the sale is facilitated by an online marketplace to a non-business consumer
  • made from a business established in an EU member state to non-business customers in Northern Ireland whose relevant turnover is under the distance selling threshold.

Legislation governing place of supply is found between section 7 and 9A of the VAT Act. Further information can be found in the VAT Place of Supply manual at POSS14000 and POSG3000.

Note: a business may not need to register if it all of its supplies to the UK are reported using the One Stop Shop (OSS) or Import One Stop Shop schemes.

The reverse charge

A business is not entitled or liable to register for VAT in the UK if all their supplies in the UK are subject to the reverse charge.

Reverse charge - services

When an overseas business makes taxable supplies of services to a business in the UK, the reverse charge will usually apply. The effect of the reverse charge is it deems the supply to be made by the UK recipient. As a result, it is not considered a taxable supply by the overseas business for the purposes of registering under Schedule 1A.

However, there are exceptions to the general rule, including where services are supplied to a private customer rather than to a business. There are also specific rules covering services in connection with land located in the UK and entertainment that takes place in the UK.

Reverse charge – low value imports of goods

From 1 January 2021, the reverse charge mechanism applies to taxable supplies of goods if all the following apply:

  • Imported into the UK in a consignment valued under £135
  • The consignment does not contain goods subject to excise duty
  • The recipient is VAT registered in the UK.

Where the conditions are met, the supply is deemed to be made by the UK recipient of the goods.

As with the reverse charge for services, such a supply is not considered a taxable supply when determining a liability to register under Schedule 1A.