Q: We are supplying payroll services to a UK embassy of a non-EU country. These payroll services are for the embassy’s staff in the UK. Do we use the general rule to determine the place of supply of services and treat the supply as taking place where the customer belongs and Outside the Scope of UK VAT or are there other rules for embassies?
A: HMRC guidance VATPOSS05700 sets out the place of supply rules for embassies as this is a Business to Business Supply which is received by an Embassy in the UK for its own use, therefore, UK VAT at 20% is applicable and this is the case whether the invoice is sent to the embassy in the UK or to the overseas government for payment.
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