VAT treatment of VPS hosting, place of supply etc.

[Contreras]

MyCo uses VPS's for its mail & web server, backup file storage, etc. (VPS in this context being basically a Linux machine provided by an internet service provider on shared hardware in a datacentre and accessed/managed remotely.)

Presumably these purchases count as a "digital service" and convoluted VAT rules apply. Cost is not really the issue, but rather minimising any VAT admin. I.e. this could be a consideration when choosing a service.

I already have a couple VPS's located in the US with a US provider.

I'm looking to add a 3rd, located in the EU with an EU provider. This provider also offers VAT exemption if requested prior to purchase.

MyCo is on the VAT FRS.

Questions:-

Do either of the above scenarios require special attention when completing the VAT return?

For the EU supplier, as a VAT registered business customer is it obligatory to request VAT exemption? or may MyCo blindly act as a non-business consumer?

Would "place of supply" be the physical server location or MyCo's location?

[TheCyclingProgrammer]

You should give your VAT number to the EU supplier so they can invoice you without VAT. Obviously the US provider does not charge VAT.

All would be counted as a service so you will need to apply the reverse charge to both the EU and US supplies. This is a simple as treating it as if you'd supplied it to yourself.

The reverse charge is dealt with outside of the flat rate scheme, therefore you would need to calculate the VAT at 20% and enter it on your return as output VAT in Box 1 and the same amount in Box 4, so it has no overall effect on your VAT liability. You should also enter the net cost excluding the calculated VAT to Box 6 (sales) and 7 (purchases).

If you use FreeAgent it will do this for you if you mark a bank transaction as "EC services", which is a bit misleading as the reverse charge should actually be applied to any service purchased from a non UK supplier, not just those from within the EU.

The quirk of the reverse charge being dealt with outside of the FRS means it is beneficial for all services purchased from an EU based supplier to be dealt with as a B2B supply as it means not having to pay the suppliers local VAT, or the reverse charged UK VAT as it is reclaimed even on the FRS.