A relevant business person `belongs’ in the relevant country. A `relevant country’ means:
- the country in which the person has a business establishment, or some other fixed establishment (if it has none in any other country);
- if the person has a business establishment, or some other fixed establishment or establishments, in more than one country, the country of the relevant establishment (ie; the establishment most directly concerned with the supply); and
- otherwise, the country of the person’s usual place of residence (in the case of a body corporate, where it is legally constituted).
A person who is not a relevant business person `belongs’ in the country of his usual place of residence. The `belonging’ definition applies equally to the recipient of a supply, where relevant.
Business establishment is not defined in the legislation but is taken by HMRC to mean the principal place of business. It is usually the head office, headquarters or ‘seat’ from which the business is run. There can only be one such place and it may take the form of an office, showroom or factory.
Fixed establishment is not defined in the legislation but is taken by HMRC to mean an establishment (other than the business establishment) which has both the technical and human resources necessary for providing and receiving services on a permanent basis. A business may therefore have several fixed establishments, including a branch of the business or an agency. A temporary presence of human and technical resources does not create a fixed establishment in the UK.
Usual place of residence. A body corporate has its usual place of residence where it is legally constituted. The usual place of residence of an individual is not defined in the legislation. HMRC interpret the phrase according to the ordinary usage of the words, ie; normally the country where the individual has set up home with his/her family and is in full-time employment. An individual is not resident in a country if only visiting as a tourist.
More than one establishment. Where the supplier/recipient has establishments in more than one country, the supplies made from/received at each establishment must be considered separately. For each supply of services, the establishment which is actually providing/receiving the services is normally the one most directly connected with the supply but all facts should be considered including
- for suppliers, from which establishment the services are actually provided;
- for recipients, at which establishment the services are actually consumed, effectively used or enjoyed;
- which establishment appears on the contracts, correspondence and invoices;
- where directors or others who entered into the contract are permanently based; and
- at which establishment decisions are taken and controls are exercised over the performance of the contract.
However, where an establishment is actually providing/receiving the supply of services, it is normally that establishment which is most directly connected with the supply, even if the contractual position is different.
VAT groups
A VAT group is treated as a single entity. This also applies when applying the ‘place of belonging’. As a result, a group has establishments wherever any member of the group has establishments.
This is an area which often leads to uncertainty, and therefore VAT issues. It is also an area where VAT planning may; save time, resources and avoid unexpected VAT costs, either in the UK or another country.
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