HMRC To Scrutinize Telcos' Place Of Supply Arrangements

by Robert Lee, Tax-News.com, London

08 October 2009

The UK tax authority has warned that it intends to "carefully examine" the company arrangements of telecommunications and internet firms which have moved, or are considering moving, their place of supply to other European Union member states in order to take advantage of more favourable rates of value-added tax (VAT).

Currently, 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. But HM Revenue and Customs (HMRC) stated in a recent brief that it is concerned some companies supplying these services are claiming to have moved their place of supply out of the UK while still maintaining significant - and taxable - operations in the country.

"Some suppliers to the UK market claim to have reorganized their businesses so that the place of supply is no longer in the UK but another member state," the brief stated. "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," the department asserted.

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