An overview of the key points including covering B2B and B2C supplies
The ‘place of supply’ is the place where you make a supply and where you may be charged and pay VAT. The majority of services provided to overseas business customers will be supplied where the business customer belongs – the so-called B2B (business to business) supply.
So, if you are billing a French company, the place of supply is France and the French company has a mandatory reverse charge obligation.
The UK company must ensure that it has proof of the customer’s business status (eg VAT number, contracts, letterhead etc).
B2B services are outside the scope of VAT but the UK company must include the sale in Box 6 of its VAT return. From 1 January 2021, there is no requirement to complete an EC sales list.
It is also good practice (but not mandatory) for the UK company to put the reverse-charge narrative on its invoice to remind the French customer of its reverse charge obligation.
If you were billing a non-EU company, the supply is still where the customer belongs and any local sales taxes are normally the responsibility of the customer.
There are limited overrides to the basic B2B rule and these can be found in VATA 1994 Schedule 4A. VAT Notice 741A is also very useful.
Services supplied to non-business overseas customers are generally supplied where the supplier belongs – the so-called B2C (business to consumer) supply. The supply will then follow the normal UK supply rules, ie UK VAT charged if the liability of the supply in question is standard rated. Again, Schedule 4A and Notice 741A are useful for any overrides to these B2C rules.
Para 16 services include consultants, accountants, lawyers, hiring of goods and the hiring of staff amongst others.
Up to 31 December 2020, para 16 services provided to non-EU consumers were supplied where the customer belongs. As a result, no UK VAT was chargeable when invoicing non-EU consumers.
Consultancy fees must be for the provision of information and expert advice. Where the services fall short of this or go beyond this,then the basic B2C rule will still be in point and UK VAT should be charged. In the recent case of Mandarin Consulting Limited v HMRC [2020] TC07714, career coaching fees charged to non-EU families were held to fall within the definition of consultancy, so no UK VAT was chargeable to the China-based families.
From 1 January 2021, Para 16 is extended to any consumer outside the UK, ie EU and non-EU consumers.
So, accountants would not charge VAT to any overseas client from 1 January 2021. B2B services remain basic rule while B2C services are covered by Para 16. There would be no EU registration obligation for B2B services as these are covered by the mandatory reverse charge. And, unless the member state has a use and enjoyment rule for Para 16 services (unlikely), there will be no EU VAT registration for B2C services either.
If supplying Para 16 services to customers outside the EU, local advice would need to be sought to determine whether the UK service provider was liable to any local taxes.
Download ACCA's technical factsheet on international VAT.