Are you a UK business providing consultancy, IT services, or other B2B services to European clients? Understanding the VAT implications post-Brexit is crucial for compliance and maintaining competitive pricing.
The Fundamentals: Place of Supply Rules
The cornerstone of international VAT is the “place of supply” principle. For business-to-business (B2B) services, the place of supply is generally where your customer is located, not where you’re based or where you deliver the service from.
Example: If your UK consultancy provides services to a German manufacturing company, the place of supply is Germany, regardless of whether you deliver the service from your London office, a co-working space in Paris, or remotely from your home.
What This Means for Your Business
1. No UK VAT on EU B2B Services
Services provided to EU business customers are “outside the scope” of UK VAT. This means:
- Don’t add UK VAT to invoices
- These sales don’t count toward the £90,000 UK VAT registration threshold
- No compliance burden for these transactions in the UK
2. Your EU Customer Handles VAT
Your European client will use the “reverse charge mechanism” to account for VAT in their own country. They’ll:
- Self-assess the appropriate local VAT rate
- Both charge and reclaim this VAT on their return (if eligible)
- Handle all VAT compliance for your service
3. Documentation is Critical
To maintain this treatment, you must prove your customer is a genuine business:
- Best evidence: Their EU VAT registration number
- Include this number on all invoices
- Keep records to support the B2B nature of transactions
Warning: Without proper documentation, HMRC may reclassify these as B2C transactions, potentially requiring you to charge UK VAT.
Invoice Requirements
Your invoices should clearly state: “This supply is outside the scope of UK VAT. Customer to account for local VAT.”
Include:
- Customer’s EU VAT number
- Clear service description
- Your UK business details
- No UK VAT amount or rate
Do You Need UK VAT Registration?
If EU B2B services are your only income source, UK VAT registration isn’t required because these services are outside the UK VAT scope.
However, consider voluntary registration if you:
- Want to reclaim UK VAT on business expenses
- Plan to serve UK customers soon
- Prefer the professional credibility of VAT registration
Common Mistakes to Avoid
❌ Adding UK VAT to EU B2B invoices
❌ Not obtaining customer VAT numbers
❌ Assuming all international services are zero-rated
❌ Not distinguishing between B2B and B2C transactions
Get Professional Advice
VAT rules can be complex, especially for businesses operating across borders. Each situation is unique, and the consequences of getting it wrong can be significant.
Need help navigating post-Brexit VAT requirements? Our experienced team provides practical, tailored advice for UK businesses trading internationally. Book a call/meeting with us today for a consultation.
