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A New Year : A New Rule for the Supply of Transport

By December 21, 2012Uncategorized|VAT news

The New year brings with it a new VAT rule for the B2C supply of the long-term hire of a means of transport.

With the exclusion of the long-term hire of a pleasure boat, the place of supply for VAT purposes will change from the place where the supplier has established his business to the place where the customer belongs. Long-term hire means 30 days or more for all transportation with an exception of the long-term hire of a vessel (in which case the period is 90 days or more).

What are the New Rules?

Where the supplier and the customer belong in the same country this will mean that there will be no change to the current VAT treatment applied – the supplier will continue to charge local VAT.

– However, where the customer belongs in another EU Member State this will mean that the supplier will have a requirement to register and charge local VAT in the country in which the customer belongs.

How do I determine where my customer belongs?

The customers’ place of belonging is his usual place of residence.

– The usual place of residence of an individual is not defined in the VAT legislation.

– HMRC interpret the phase according to the ordinary usage of the words – meaning the country were the individual has set up home with his  family and is in full-time employment.

– An individual is not resident in a country if only visiting as a tourist.

With the intending changes to the personal tax residency rules that are also due to come into play next year, suppliers affected by the change will need to carefully consider the evidence obtained to support its customers usual place of residence. This will obviously have a knock-on effect to how the supplier will account for VAT and its wider compliance obligations.

Please let us know if you would like to discuss this issue in more detail. You can call us on 01962 735350.

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