A. The first thing to consider is where the supply is deemed to take place under the rules determining the place of supply of services. Cars and party buses are ‘means of transport’ and there are different place of supply rules depending on whether the hire is short-term or long-term, and whether the supply is business to business (B-B) or business to consumer (B-C).
‘Short-term’ hire means the transport is continually hired for not more than 30 days; hire exceeding 30 days is classed as ‘long-term’ hire.
For short-term hire, whether B-B or B-C, the place of supply is where the customer physically takes control of the means of the vehicle. For example, a French individual is hiring a party bus for 3 days and is collecting the keys in the UK. The place of supply would be the UK and UK VAT is charged at the standard rate.
B-B supplies of long-term hire fall under the general rule, meaning that the place of supply is where the business customer is located. However, in addition to the customer’s location, it may be necessary to consider the use and enjoyment rules. These apply either where the business customer is based outside the EU but the vehicle is used in the UK; or when the customer is in the UK, but uses the vehicle outside the EU. Further information on use and enjoyment can be found in Notice 741A, section 13.
For B-C supplies of long-term hire, the place of supply is where the individual belongs. For example, a Spanish individual holidaying in the UK has hired a luxury 4×4 for 31 days, they have collected the car in London. The place of supply would be Spain, as that is where the customer resides. The UK hire company would have to take advice on the Spanish rules in case this gave them an obligation to account for the VAT on the supply in Spain.
For further information please see https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/vatposs11000.
If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
