Family offices providing services to overseas recipients should take care when determining the VAT treatment. It should not be assumed that services can be supplied VAT free, just because the recipient is overseas or payment is made from a non-UK source.
In order to determine whether VAT should be charged on a supply of services, the ‘place of supply’ rules need to be considered. The general rule is that services supplied to a private individual or non-business entity (i.e. ‘B2C’ services) are deemed to be supplied where the supplier belongs. It follows that, if the supplier belongs in the UK, the services will normally be subject to UK VAT.
Services supplied to an overseas business entity are usually treated as supplied where the customer belongs and, therefore outside the scope of UK VAT. However, there are many exceptions to this general rule. One common example is where services directly relate to real estate. Such services are treated as supplied where the real estate is located. So, for example, if a family office supplies services in connection with the management of UK real estate, the services will usually be treated as supplied in the UK and, therefore, within the scope of the UK VAT rules. Similarly, if the services relate to real estate outside the UK, there could be an obligation to register and account for VAT (or equivalent taxes) in that country.
Where a package of services is supplied, it may be seen as a single composite service with the entire package having the same place of supply and, therefore, the same VAT treatment. Alternatively, it may be possible to split the package into separate services, each with its own place of supply and VAT treatment. The latter can sometimes be beneficial, as it may allow some elements to be supplied VAT free, where standard rate VAT would otherwise apply. This type of ‘single or multiple’ supply question is a common source of disputes with HMRC, so take care when analysing the nature of your services.
If you would like to discuss this or any other VAT issues, please contact our family office VAT specialist, Lisa Burnside.