Under normal VAT rules, the place of supply of a business to business (B2B) service is the place where the recipient of the service belongs. In cases where the recipient is outside the European Union, this generally means that no EU VAT is chargeable. However, 'use and enjoyment' provisions allow national Tax Authorities to adapt the place of supply rules outlined in the Principle VAT Directive where they perceive a threat to the tax yield. We understand that HM Treasury is considering ways in which these provisions could be enacted in relation to advertising services which could be detrimental to the Betting & Gaming Sector.

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Summary
Under normal VAT rules, the place
of supply of a business to business
(B2B) service is the place where the
recipient of the service belongs. In
cases where the recipient is outside
the European Union, this generally
means that no EU VAT is
chargeable.
However, 'use and enjoyment'
provisions allow national Tax
Authorities to adapt the place of
supply rules outlined in the Principle
VAT Directive where they perceive
a threat to the tax yield.
We understand that HM Treasury is
considering ways in which these
provisions could be enacted in
relation to advertising services
which could be detrimental to the
Betting & Gaming Sector.
09 March 2016
Expected 2016 budget announcement for VAT on advertising
In the 2015 Summer Budget, the Chancellor of the Exchequer, announced measures intended to
counter perceived tax avoidance by VAT exempt sectors including international on-line betting &
gaming groups. HMRC has already introduced measures to amend the VAT rules in relation to the
supply of repair services provided in the UK to insurers established outside the UK, and it is
anticipated that a similar move is likely in connection with the supply of advertising services.
In normal circumstances, supplies of advertising services made from UK businesses to non-EU
resident businesses would be outside the scope of both UK and EU VAT. This is because, under the
Principle VAT Directive the place of supply is deemed to be where the business receiving the
supplies is established. In a gambling context, the most popular jurisdiction with gambling
commissions is Alderney and Gibraltar both of which do not have VAT regimes. As a consequence,
businesses established in those jurisdictions do not suffer the burden of VAT. By contrast, a gaming
business established in the EU would incur VAT on the supply of advertising services which, due to
the exempt nature of gaming, it would be unable to reclaim.
The introduction of a 'use and enjoyment' provision for advertising services is likely to seek to tax the
supply in the jurisdiction within which the gambler or gamer is located and if that is within the EU,
then a VAT charge would arise. For betting & gaming groups with a UK consumer base supplies of
advertising services would become taxable at the standard rate of UK VAT (ie 20%). Such a charge
will, undoubtedly put a dent in affected businesses' profit forecasts.
The UK Budget will take place on 16 March 2016. We consider that it is highly likely that the
Chancellor will announce either the introduction of the use and enjoyment rule for advertising
services or a consultation with a view to introduction at a later date. What will also be highly
interesting is how these potential new VAT regulations will align with other Indirect Taxes (General
Betting Duty and Remote Gaming Duty) given that for UK advertising to take place there must also
be a UKGC license in place.
Comment – business involved in the Betting & Gaming sector will need to closely consider
their current tax structure and profile. We will comment further after the budget should the
expected announcement be made.
VAT on Advertising Services – a threat to
online betting and gaming?
VAT Alert
Contact
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Nick Garside London & South East nick.garside@uk.gt.com (0)20 786 52231
Irena Nelson London & South East irena.nelson@uk.gt.com (0)20 772 82239