Do we charge VAT for hiring out recording studio to overseas band?
Q. Our premises includes a recording studio with specialised equipment which we hire out to local bands and performers, charging VAT on the fee. We have received an enquiry from a French band and they have refused to pay the VAT because they are based outside the UK. Are they correct?
A. Most supplies of services provided by a UK business to an overseas business customer are not subject to VAT because the place of supply is deemed to be the customer’s country. This is known as the general business-to-business rule. If the customer is based in the EU, they will account for output tax on their own return by doing a reverse charge calculation, usually claiming input tax for the same amount. However, you are hiring goods to the band - the recording equipment - and the hire of goods is subject to a “use and enjoyment” override. In other words, it is all about where the band will be using your equipment, which is the UK, so UK VAT at 20% VAT must be charged on your fee. The fact that they are based in France is irrelevant.
Tip. If the band is VAT registered in France, they should be able to reclaim the VAT by submitting a refund claim to HMRC, under what is commonly known as a “13th Directive claim”.
For detailed commentary on the use and enjoyment rules (see The next step ).
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