VAT on services and the place-of-supply rules

If your company is VAT-registered and supplies standard-rated services in the UK, you charge 20% VAT — to businesses and consumers alike. Some services are exempt or zero-rated (parts of finance, health, education, insurance), so it’s worth confirming your sector’s treatment before assuming 20%.

When your company must register for VAT →

• B2B (to a business): the supply is where the customer belongs — so services to an overseas business are usually outside UK VAT, and the customer accounts for VAT under the reverse charge
• B2C (to a consumer): the supply is generally where the supplier belongs — so you usually charge UK VAT

These are general rules. Land, events, digital services and a handful of others follow special rules, so a specific service can behave differently.

For most B2B services to a business abroad, you don’t charge UK VAT: the place of supply is the customer’s country and they handle the VAT under their local reverse charge. You still report the sale on your VAT return and must keep evidence the customer is in business overseas. Getting this wrong — charging UK VAT you shouldn’t, or failing to keep evidence — is a common mistake for consultancies and agencies.

Digital services — software, e-books, online courses, streaming — supplied to consumers are generally taxed where the consumer is. Selling to EU consumers can create EU VAT obligations that the One Stop Shop (OSS) can simplify. If you sell digital products across borders, this needs proper setup rather than guesswork.

Cross-border VAT for online businesses →

VAT on services — especially cross-border — is one of the easiest areas to get wrong and one of the more expensive. We work out the correct treatment for what you sell and to whom, and set up your invoicing and returns to match. Call 0114 327 1480.

Our VAT returns service →