HMRC have issued a new Revenue & Customs Brief directed at all businesses within the telecommunications, Internet service provision and broadcasting sectors who claim to have moved or may consider moving the place of supply of their services from the UK to another Member State. The Brief effectively threatens to challenge any claim to have relocated which is based on tax convenience but which is not supported by the realities of the structure of the business concerned.
The Brief includes the following:
‘HMRC are aware that some businesses within the telecommunications, Internet service provision and broadcasting sectors have implemented arrangements that claim to move the place of supply of their services from the UK to another Member State in order to take advantage of more favourable VAT rates.
The place of supply of telecommunications, Internet service provision and broadcasting services when provided to non-business customers in the EU is the place where the supplier is established. Some suppliers to the UK market claim to have reorganised their businesses so that the place of supply is no longer in the UK but another Member State.
HMRC accepts that businesses have the freedom to choose where to locate and to enjoy any resultant benefits.
However, HMRC will carefully examine all such arrangements. Where HMRC considers that there are sufficient human and technical resources in the UK to form a fixed establishment from which the services are supplied, or where the entity purporting to make the supplies does not have a sufficient presence in the other Member State to be established there, HMRC will mount a robust challenge.’
Whether such a challenge would be quite as straightforward as HMRC may believe, given the complexities of ‘establishment’ in an Internet age, is questionable.
