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Q: My client is a UK-based UK VAT registered car garage. It has been asked by a Dutch-based VAT registered insurer to repair a Dutch insured party's van in the UK. The Dutch insured party uses the van to transport goods from its UK supplier to its customers all over the UK. The van is being repaired after an accident and my client is contracted by the insurer to repair it under the Dutch insured party's insurance cover. I assume my client will not have to charge UK VAT on its repair fees as its customer is overseas?

A: Unfortunately no. While the service of work on moveable goods for a business customer normally follows the general B2B Place of Supply rule of 'where the customer belongs' (irrespective of where the work is carried out), there is a special anti-avoidance rule that applies where the work is being done pursuant to an insurance contract and the customer is not the insured party. Under this special “Use & Enjoyment” rule, the Place of Supply is determined instead by where the repaired goods will be used/enjoyed by the insured party. In this case this is the UK, and so the UK supplier should charge UK VAT at the Standard Rate (see chapters 6.3, 13.1 & 13.2 of Notice 741A) even though the customer appears to be based in the Netherlands.

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These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

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Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.

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