A. For VAT purposes, the ‘place of supply’ is where the supply is liable to VAT and there are specific rules to determine where this is.
To determine the place of supply of most services, the ‘general rule’ applies, meaning that the place of business-to-business (B-B) supplies is where the recipient of the service belongs. VAT is the liability of the recipient whether he is VAT registered in the member state or not. If VAT registered, the recipient must account for the VAT using the reverse charge procedure. If not VAT registered, the value of reverse chargeable services bought in would (if the French rules mirror UK rules) be treated as their turnover when looking at VAT registration in France. Consultancy services fall within the general rule (although if the consultancy related closely to land, different rules would apply).
If the place of supply is not the UK, then the supply is outside the scope of UK VAT. Supplies which are outside the scope of UK VAT do not count to taxable turnover for calculating liability to VAT register in the UK.
In your client’s case, therefore, as he is making a B-B supply to his customer in France, the value of the supply does not count to his UK turnover, so does not make him liable to register in the UK.
He does not need to register in France, as any requirement to account for VAT there is the responsibility of his French customer.
Incidentally, if the customer were unable to provide either a VAT number or any other supporting documentation to show that it was in business, the supply would be regarded as being a business-to-consumer (B-C) supply. The general rule for B-C supplies deems the place of supply to be where the supplier belongs, and therefore the supply would be treated in the same way as any other UK supply your client makes and count as UK turnover.
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.
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