Although the changes affecting VAT on services have been less significant, our practice has been inundated with questions and queries about the new rules and procedures relating to the supply of services to the EU and from the EU.
For services that businesses supply to EU customers the decision should be taken whether the supply is taking place for VAT purposes. Sometimes if the business supplying services is registered in the UK does not automatically mean that this supply should be subject to UK VAT.
B2B Supply of Services
The general rules of supply should be applied in case of B2B supply of services. This means that the place of supply is where the customer belongs. In case of UK businesses supplying services to the EU, the place of supply is the EU, not the UK. Such supply if services are outside of the scope of the UK VAT and should be zero-rated for book-keeping purposes.
Businesses should make sure that they have evidence of their clients’ EU VAT registration to be able to treat their supply outside the UK VAT.
Some services should be treated as supplied in the UK for VAT purposes even if B2B customers are overseas. For example, some services relating to UK land and buildings.
B2C Supply of Services
In case of B2C supply of services, the general rule of B2C supply will apply after Brexit. The rule is that the supply should be treated as the supply in the UK and should be taxed with the appropriate rate of VAT applicable for the type of service they provide.
In case of electronically supplied services, such as internet downloads, special rules require to treat the supply as made where the client’s customer belongs. For example, if such supply is made to EU customers, such supply is deemed to take place in the EU and should be subject to the EU VAT rules. This means that supplying businesses are required to register for a foreign VAT in the country where their customer belongs to start charging a foreign VA
Conclusion: Businesses should apply the general VAT rule in case of B2B if businesses supply services after Brexit. Such supplies should be zero-rated. If the client has no VAT registration or the supply is B2C, the standard UK VAT will apply. However, in case of electronically supplied services, businesses will have to register for VAT in the countries where their customer belongs. Further guidance for which types of services this applies to, check HMRC official website.
UK-Accountant will provide you support in dealing with most complicated cases.
Check other resources
New Distance Selling Regime with the EU
How to Deal with Goods That Never Leave the EU
https://uk-accountant.com/how-brexit-affected-the-vat-on-the-supply-of-services/