Services and Brexit
It is expected that the place of supply rules for services will remain broadly the same following Brexit…
Business to Business (B2B) supplies
Generally for a business to business (B2B) supply of services the place of supply is where the customer belongs and so the customer needs to account for VAT at their local rate on their VAT return (the reverse charge). No UK VAT is charged on the sales and it is treated as outside the scope of UK VAT.
To determine if the supply is being made to a business they should provide their VAT number, it will still be best practice to quote the customer VAT number on the invoice as this is the best evidence of a B2B supply. If they are unable to provide a VAT number you can accept other evidence of business status, for example a link to their website or other commercial documents. It is your decision to accept alternative evidence, if it is not accepted then the sale must be treated as a sale to an individual, business to consumer (B2C)
For sales made from 1 January 2021 onwards there will no longer be a need to complete an EC Sales List when providing services from the UK to a business in an EU member Country (see our previous blog here)
Buying services from an EU supplier
When buying services from an supplier based in the EU or the rest of the world the purchase comes under the reverse charge, you account for both the input and output VAT on your VAT return. This should remain the same following Brexit.
Business to Consumer (B2C) supplies
Currently when services are provided to individuals in an EU member state from a UK VAT registered business the place of supply is deemed to be where the seller is based. This means that when providing services from a UK business to an individual in France for example, UK VAT would be charged.
For services provided to non-EU individuals the place of supply is the country where the customer is based and therefore is outside the scope of UK VAT, so no VAT is charged.
After Brexit it is expected that the sale of services to individuals based in the EU will follow the same treatment which is currently in place for non-EU individuals, the sale will be outside the scope and no VAT will be charged.
As is usual with VAT there are exceptions to the general rules above, examples of these are services connected to land and admissions to events, which may create an obligation to register for VAT in an EU Member State. Further information on special rules for services can be found on www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741.
From 1 January use and enjoyment rules may be subject to review. At the moment these rules are intended to make sure taxation takes place where services are consumed and allow for a supply to become subject to UK VAT when under normal rules they would be outside the scope. Use and enjoyment is only a consideration when certain services made by a UK provider are consumed outside the EC or those services when supplied by a non-EC provider are consumed in the UK. After Brexit the rules will apply to outside the UK rather than outside the EC. These services are:
- Telecommunication services
- Broadcasting services
- Electronically supplies services (for B2B)
- Hires goods
- Hired means of transport
- Insurance repair services
For further information see www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services.
Supplying Digital Services
For businesses who provide digital services to individuals in EU countries further information regarding the end of the UK MOSS scheme is available here: https://www.lewisbrownlee.co.uk/changes-coming-for-sales-made-to-eu-member-countries/
If you have any questions or need any assistance with your VAT please contact Yvonne Collings on 01243 782 423 or email [email protected]