In the UK, VAT on work carried out abroad is determined primarily as per the ‘Place of Supply of Services’ rules. The ‘place of supply’ is the location where a supply is made and where VAT may be charged and paid.
The type of service and whether you provide the services through a B2B arrangement or as a B2C are also taken into account for VAT purposes. Here, we discuss some important considerations related to VAT on work carried out abroad. The purpose of this is to help you understand how you will be charged VAT if you’re supplying services abroad.
The General Rule
The place of supply is determined by what is known as the ‘general rule’ for the majority of supplies of services. However, certain supplies are subject to strict rules concerning their place of supply. Apart from those covered by specific regulations, the general rule for determining the place of supply of services is when you provide services to:
- The place of supply is the place where the customer resides i.e. business customer
- The place of supply is where the supplier is based i.e. non-business customer
If the Customer Is a Business in the EU
If it is a B2B customer, the same rule is followed as before, i.e., the customer’s location. This sale is often regarded as an OSS, but we add the reverse fee (RC) as the customer is located in Europe. You only display it in box 6 on the VAT return and will require filing a return on the EC Sales list and utilize indicator 3 for Services.
If the Customer Is an Individual Outside of the UK
When B2C services for entertainment events are supplied, we look at where the event is being held out. If this event takes place in the United Kingdom, we regard this sale as the normal VAT rate and display the return on VAT in boxes 1 and 4.
If the Customer Is in the UK
This is a regular UK standard rated activity and VAT is charged for both B2B and B2C clients at 20 percent on the sale. Display in boxes 1 and 4 for the VAT return.
Special Rules for the Place of Supply
In certain situations, the place of supply is neither established by the location of the provider nor the customer, but rather by what service is provided. The following are some of these situations.
Hiring Out a Means of Transport
A means of transport refers to anything that is used to transport goods or people. The supply location for means of transport services will depend on the amount of time the transport is supplied for. If the transport supplied is provided for 30 days for vehicles and 90 days for ships and boats, then the specific location for which the transport is provided will be the supply location. If the duration is shorter than this, then the supply location will be the place where the transport is physically handed over to the customer.
Land and Property Services
If you provide land and property-related services, the place of supply will be where the land or property is situated.
The location where access to an event is given is where the event happens, wherever the client or supplier is based.
How to Calculate VAT as Per ‘Place of Supply of Services’ Rules
If the place of supply is considered to be the UK after application of the general rule, you will pay UK VAT as usual. You may be required to pay EU VAT if the place of supply is outside of the UK but within the EU. Indeed, you will need to enroll and invoice for VAT in the country of supply in this situation.
Consult the tax authorities of that country to ensure that you get it right to determine how to administer the services you offer. If the place of supply is outside the EU, it will be beyond the domain of VAT, and only box 6 of your VAT return should document the transaction.
VAT for services provided outside of the UK can often be difficult to determine. However, you can make the task easier for yourself by using the information provided in this short guide on VAT on work carried out abroad.