VAT implications for businesses supplying goods or services to EU/Non-EU

Place of supply

For VAT on services, the general ‘place of supply’ principle still applies. This rule determines whether the service is within the scope of UK VAT.

For B2B services, the place of supply is where the customer is resident. This means that where your business customer is resident in the EU, the supply of the service is outside the scope of VAT, so zero-rated. Your non-UK based customer then uses the revered charge to the VAT in their return. However, you will need to account for the transaction as zero-rated on your VAT return. For this, you need evidence of your customer being out of the UK (typically a valid VAT or tax ID number).

For B2C services, the place of supply is where the supplier (i.e., your business) belongs. This means, just like before Brexit, you will need to charge VAT to your EU and non-EU customers, although some important exceptions apply.

Special rules

Under existing rules, certain services, such as supplies about UK land, transport, restaurant and catering services, hiring goods situated in the UK, broadcasting, and admission to events, conferences, and meetings in the UK, are treated as made in the UK. They are currently liable to UK VAT even where the customer is in the EU.

Do UK businesses have to pay VAT on services provided to the EU?

The VAT treatment of services is subject to the rules relating to the supply of taxable services. After Brexit, the general place of supply rules has not changed.

For supplies to businesses outside the UK, the place of supply is outside the UK; therefore, there is no UK VAT chargeable. As a result, a UK business supplying services to an EU business is not required to charge VAT. This is no change from the situation pre-Brexit.

What is the difference between EU VAT and non-EU VAT?

If the customer is situated outside the UK, no VAT is chargeable. Following the transition, the UK is not part of the EU, and therefore the distinction between EU and non-EU customers does not apply. Whether the customer for such services is in the EU or outside the EU, no VAT is chargeable.

Buying services from EU countries

UK businesses buying services from EU countries previously used the reverse charge mechanism, accounting for both input VAT and output VAT on such supplies. This procedure will not change.

Key points

  • Businesses in Great Britain cannot take advantage of triangulation when selling goods to the EU.
  • It may be necessary to register for VAT in the country where goods are sold.
  • An export declaration is necessary when moving goods out of GB to an EU country.
  • Customs duty does not usually arise when exporting to the EU because of the Brexit trade deal.

 

 

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