Outsourcing and VAT
Outsourcing and VAT

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Outsourcing and VAT
  • Transfer of assets
  • Transitional services
  • Service fees
  • Practical points on VAT recovery
  • Supply of staff
  • Cross-border VAT

Brexit: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. For further guidance, see Practice Note: Brexit—UK tax consequences.

There are no specific laws, including tax laws, applicable to outsourcing arrangements and no technical legal meaning of the term. Consequently, each outsourcing arrangement will be specific to its own particular facts and will raise a different mix of tax issues, including VAT issues. This Practice Note summarises the main VAT issues to consider in relation to outsourcing arrangements. For the wider tax issues that will be relevant, see Practice Note: Outsourcing—general tax issues.

This Practice Note focuses on contractual outsourcing arrangements. For details on joint venture outsourcing arrangements, see: Joint ventures and tax—overview.

Transfer of assets

As part of outsourcing arrangements, it may be necessary for the customer to transfer business assets to the service provider in order for the service provider to be able to provide the outsourced services. Business assets transferred as part of an outsourcing may include, for example, office space and IT equipment. Employees may also be transferred as part of the outsourcing arrangements (for further details, see: Supply of staff, below). The transfer of business