Revenue & Customs Brief 22/12 issued last week clarifies the current policy on the place of supply of services rules connected to land following recent decisions at EU level. The brief is aimed at businesses that make or receive the following services:

- Supply or purchase of exhibition stands;

- The storage of goods for overseas customers; and

- The provision of access to airport lounges.

The clarifications aim to confirm the treatment applicable since the rules changed on 1 January 2010/ 1 January 2011 (dependant on the service). The HMRC guidance comes about due to the inconsistent treatment applied by Member States in respect of these supplies which in some cases had lead to double taxation.

What are the changes?

1. Stand Space – With regard to the supply of stand space at exhibitions and conferences, the current policy applied is that the supply of specific stand space will continue to be treated as a land related supply. Therefore, the place of supply for VAT purposes will be the place where the land is located. However, where the stand space is provided with accompanying services as a package, this will no longer be treated as a land related supply. Instead, the services will fall under the general business to business rule and will be subject to VAT in the country in which the recipient of the service belongs. This will now mean that exhibition or conference providers supplying a package of services will no longer be required to charge UK VAT on these supplies.

2. Storage of Goods – Previously, it has been HMRC’s policy that all supplies of storage space are land related supplies. HMRC has now confirmed that where the supplier grants an exclusive right to use a specific area of a UK warehouse or storage area, then this will continue to be treated as a land related supply. However, where the supplier agrees to store goods but does not grant an exclusive right to a specific area, this will not be seen to be a land related supply and will be treated as falling within the general place of supply rule. This now means that where the supplier provides such a service to a non-UK business customer who uses the services for business purposes, the place of supply will be in the country in which the customer belongs.

3. Airport Lounges – HMRC have not previously considered the supply of access to airport lounges as land related supplies. However, their policy change now means that such services will be land related and VAT will therefore be due, if applicable in the country in which the lounge is located.

When do the changes take effect?

The change in policy comes into effect from the date of the brief. However, HMRC has agreed that where businesses have been applying the VAT treatment in accordance with it’s own earlier policy, they may continue to apply the treatment for a transitional period of up to three months. However, businesses who wish to adopt the new treatment can do so with effect from the current date.

Can I make a historic adjustment?

HMRC state that adjustments to earlier period can also be made provided that the customer has not already recovered the VAT and any VAT repaid by HMRC is refunded to the customer.

What does this really mean for me?

Although the changes aim to simplify the treatment of such services cross border and allow non-UK businesses an easier method by which to recover the VAT on their own VAT return, the changes do bring with them added complication and some additional administrative burden. Examples of which include having to obtain EU VAT numbers and complete EC services lists for those supplying exhibition space and storing goods on behalf of non-UK business customers. They also bring about added complication for those supplying access to airport lounges as local VAT registrations may well be required when supplying on a wholesale basis.

Businesses supplying such services will now need to review their existing position and determine how they should accounting for VAT and whether there is scope to submit a claim for earlier VAT return periods. We have significant experience of advising clients on these issues, so if you have any questions please call, Martyne Pearson on 01962 735350