Commentary

V3.231 Services received from abroad

Part V3 Supplies, acquisitions and imports

V3.231 Services received from abroad

The 'reverse charge'

V3.231 Services received from abroad

Introduction

VATA 1994, s 8 imposes a 'reverse charge' which transfers the liability to account for and pay tax on 'relevant services' from the person making the supply to the recipient ('R'). Where the reverse charge applies, all the same consequences (including, where appropriate, a liability to register for VAT in respect of such supplies) follow as if R had supplied the services in the UK in the course or furtherance of R's business and that supply were a taxable supply1. Thus, R is treated as having made a supply of services. R must account for and pay tax in respect of that supply if R is a taxable person and must otherwise include the services in the value of R's taxable supplies for the purpose of determining R's liability to registration under VATA 1994, Sch 1. R may also, subject to the provisions discussed in V3.4, be entitled to input tax credit. However, supplies made under this provision are to be disregarded for the purpose of calculating an entitlement to input tax credit2. In other words, input tax cannot be attributed to the deemed supply (which would give full input tax credit), but only to the actual use to which the service was put.

Example

X is partly exempt and is entitled, under its partial exemption method, to recover 50% of the input tax which it incurs. It is obliged to account for VAT under the reverse charge for legal services received

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