VAT - Use and enjoyment provisions

The use and enjoyment provisions are a set of VAT rules which state that VAT should be charged in the place where the effective use and enjoyment of a service occurs. Here we look at what this means for suppliers in Ireland and Northern Ireland.

Overview
Where does use and enjoyment take place?
How do the use and enjoyment provisions work for suppliers in Ireland?
What services are covered by the use and enjoyment provisions in Ireland / EU?
How do the use and enjoyment provisions work for suppliers based in Northern Ireland?
Use and enjoyment examples
Further information

Overview

The use and enjoyment provisions are a set of VAT rules which state that VAT should be charged in the place where the effective use and enjoyment of a service occurs.

Where a service is partially used and enjoyed in another tax jurisdiction, the supplier (or customer required to account for the supply) should carry out an apportionment based upon the extent to which it’s used and enjoyed in the different regions.
Use and enjoyment is different to the general rules which apply to the Business to Business (B2B) and Business to Consumer (B2C) provision of services.

As services are not covered under the Northern Ireland Protocol, these use and enjoyment rule changes will apply to the whole of the UK including NI.

Where does use and enjoyment take place?

For VAT purposes use and enjoyment is deemed to take place where a recipient consumes services, irrespective of where the contractual arrangements are agreed, where payment is made or where the supplier / consumer is located.

How do the use and enjoyment provisions work for suppliers in Ireland?

For suppliers in Ireland, the use and enjoyment provisions apply in the following scenarios:

Where the place of supply (i.e., the place where VAT is due) would be outside the EU under the general VAT rules but the services are effectively used and enjoyed in Ireland.
Where the place of supply (i.e., the place where VAT is due) would be Ireland under the general VAT rules but the service is used and enjoyed outside the EU.

What services are covered by the use and enjoyment provisions in Ireland / EU?

Services covered by the use and enjoyment provisions in Ireland / EU are:

Hiring of movable goods
Hiring out of means of transport
Telecommunications services (B2C only)
Financial services (B2C only)
Money Transfer Services.

From 1 July 2021, all businesses supplying these services cross-border to consumers (B2C) in the EU may fulfil their VAT registration obligations using the VAT One Stop Shop scheme (OSS).

How do the use and enjoyment provisions work for suppliers based in Northern Ireland?

For Northern Ireland based suppliers, the use and enjoyment provisions apply in the following scenarios:

Where the place of supply (i.e., the place where VAT is due) would be the UK under the general VAT rules but the services are effectively used and enjoyed outside the UK.
Where the place of supply (i.e., the place where VAT is due) would be outside the UK under the general rules but the services are effectively used and enjoyed in the UK.

In these circumstances, the place of supply is where their effective use and enjoyment takes place. Where this is the UK, the services are subject to UK VAT.

Where a service is enjoyed between two locations (i.e., used both in the UK and outside of the UK) the supplier should apportion the time the service is used in each location and apportion the VAT liability based on this. UK VAT will only be charged on the portion that the service was used and enjoyed within the UK.

What services are covered in the UK?

The letting on hire of goods (including means of transport)
Electronically supplied services (B2B only)
Telecommunication services (B2B only)
Repairs to goods under an insurance claim (B2B only)
Radio and television broadcasting services

Important note: VAT registration requirements

These changes may have implications for businesses throughout the UK and in Northern Ireland and create VAT registration requirements for UK suppliers in EU jurisdictions.

Most EU jurisdictions have a nil registration threshold for non-established overseas businesses and so a one-off small sale could trigger an overseas VAT registration requirement.

Where suppliers believe that these provisions may apply, it is extremely important that they are aware of where their customer intends to effectively use and enjoy the services supplied.

Use and enjoyment examples

The below table shows examples of the use and enjoyment provisions:

Scenario	Place of supply
A UK business supplies web hosting services to another business for use both in its UK headquarters and its Canadian branch.	To the extent that the web hosting supplies will be used in the UK, they will fall within the scope of UK VAT. To the extent that the web hosting services are used in Canada, the supply will be outside the scope of UK VAT. Canadian VAT rules will need to be considered.
A UK golf shop hires out a set of golf clubs to a UK customer for use on a holiday in the USA.	Outside the scope of UK & EU VAT.
An ROI based business hires moveable equipment from Ireland to a private customer based in Great Britain (GB). The GB customer will use the equipment 50% whilst in ROI and 50% upon return to GB.	50% within the scope of ROI VAT 50% within the scope of UK VAT.
A UK registered business hires audio visual and lighting equipment to a UK customer. During the period of hire the customer uses this equipment 60% in the UK, 25% in France and 15% in the USA.	60% liable to UK VAT 25% liable to French VAT 15% outside the scope of UK or EU VAT.