UK property: “offshore” VAT issues on UK consultants’ fees

Jersey, Guernsey or other offshore companies are frequently used to purchase UK commercial property.  These companies need to be registered for UK VAT if they will be performing “taxable” activities in the UK such as developments.  These companies will use the services of UK-based advisers such as lawyers, architects and other professionals.

For VAT purposes, the place of supply of services relating to land is deemed to be the place where the land or property is situated.  Therefore UK advisers require to charge UK VAT on their fees in respect of services to the offshore company because the land is situated in the UK.  However non-land services supplied from the UK to offshore jurisdictions such as Jersey, Guernsey or the BVI are subject to a different VAT rule.

VAT thus charged to the offshore company needs to be recovered. Where VAT is not due it is important to ensure any VAT incorrectly charged by UK suppliers is not paid in the first place, otherwise it may not be recoverable.   Offshore companies which perform “taxable” activities in the UK such as property development are subject to a special VAT registration procedure and are dealt with by a specialist HMRC office in the UK.

Therefore it is important to take advice in advance regarding  the correct VAT registration procedure for the offshore company and to ensure the VAT charged to it does not become irrecoverable.  RKG Consulting will be pleased to advise on the correct VAT registration and refund procedures for offshore companies carrying out property development and other “taxable” activities in the UK.