In this Brexit article, we look at the rules which will apply to the VAT treatment of services being supplied to businesses in the EU (B2B supplies).
The good news is that the rules for services will largely stay the same after 1st January 2021 (unless some changes are announced at a late stage).
Since 2010, the place of supply for VAT purposes of most B2B services has been where your customers are based – where you carry out the work is irrelevant (although there are some exceptions which we will mention later). This is known as the general rule, and this will not change. Therefore where your customer is outside the UK and is in business, no UK VAT is charged on the services in question. In addition, you will no longer be required to submit EC sales lists.
Please be aware, that if your customer also has a place of business in the UK you will have to determine which place of business is most closely concerned with the supply you make to them; if it is their UK office rather than their office outside the UK, then UK VAT will have to be charged.
Just to complete the picture on general rule services; if you receive such services from a business outside the UK, you will still have to apply the reverse charge. This means that you calculate VAT on the value of services received and include this in box 1 of your VAT return with a corresponding entry in box 4, subject to any partial exemption restriction. The value of the services received also needs to be included in boxes 6 & 7.
An important change will take place on 1st January for services where the place of supply depends on where they are ‘used and enjoyed’. This relates to the hire of goods including means of transport, electronically supplied and telecommunication services, repairs to goods under an insurance claim and radio and television broadcasting services.
Because it would take more space than we have available here to outline these rules, we would refer you to VAT Notice 741A section 13, if you supply such services to overseas businesses. A link is available here. When reading these, from 1st January 2021, references to ‘outside the EU’ will change to ‘outside the UK’.
Finally, the place of supply rules relating to services where performed (e.g. admissions to events, catering, education services etc.) and those relating to land (e.g. construction, surveying, providing accommodation in hotels etc.) will not change – further details can be found in Notice 741A sections 7 & 9. These can result in the supplier having to register for VAT in another EU member state.
We will issue further Brexit Newsletters when we receive any further information on the subjects already covered or changes which you need to know about.