International UK VAT Treatment for Goods and Services outside the UK

Is your UK business registered for VAT (value added tax)? If it is, then you need to be familiar with the details surrounding the different VAT rates which apply to the sales of good and services outside the UK.

How do I treat VAT on the sale of goods and services outside the UK?

While VAT within the UK is fairly straightforward, outside the UK may get a bit tricky. To give it better context, let’s start with how VAT is treated within the UK:

• The standard rate of 20% apples to almost all business goods and services unless they fall into categories other than “goods” and “services”;

• The reduced rate of 5% applies to expenses like children’s car seats or residential energy bills, for example;

• A rate of 0% applies to expenses like children’s books and clothes and most kinds of food.

All the items in the above categories are to be included in your UK VAT return, even if they are zero-rated.

However, some goods and services do fall outside the scope of UK VAT return, such as financial and property transactions as well as postage stamps.

VAT on any goods and services sold to EU businesses or individual customers

for example, can be a bit tricky as the UK VAT requirements no longer apply. To make matters a bit simpler, start with considering:

• If you’re selling Goods only to an EU registered business customer or individual customer, VAT is zero

• If you’re supplying services only to an EU registered business customer who has a VAT number, if not, you will treat them as a non-business customer (even if they are a registered business), Reverse Charge Rules apply for VAT

• If you’re supplying services only to outside the UK, to individual customer, UK VAT rules will apply as if the service was provided inside the UK therefore it could be zero, reduce rate, or standard rate 20% and this is known as the general rules, non-business customer, the place of supply is the place where the supplier belongs

• Those to the rest of the world other than EU whether are goods or services you do not need to charge VAT.

Place of supply

Is the place where you make a supply and where you may be charged and pay VAT. With services, deciding the place of supply can be complicated. There are various rules that apply, depending on:

• whether you’ve more than one business location
• the kind of service you give ( special rules)
• the place where your business or your business customer ‘belongs’

Which country’s VAT rules to use when charging VAT on services

If you’re UK company and the place of supply of your service is in an EU, no UK VAT charge, however for certain supplies, you may need to register for VAT in the country of supply.

If the supply of service is not in the EU, you do not have to charge VAT, however you need to report the sale in box 6 of your VAT return

Special rules for the place of supply.

In certain situation, the place of supply is decided by what service is provided, rather than where was the supplier or the customer is. for more information check HMRC link

https://www.gov.uk/guidance/vat-how-to-work-out-your-place-of-supply-of-services

Overseas Purchases of Goods or Services by UK supplier

If a UK registered business buy goods or services from oversea, the overseas supplier will not charge VAT, however the UK buyer will need to charge VAT as output and reclaim the VAT as input if they make a taxable supply, reclaim a portion of the VAT if they make taxable and exempt supply, or if they make exempt supply only then they cannot claim back the VAT.

The subject of VAT outside the UK is a very, very broad one so we’d recommend getting in touch with one of our business financial advisers to better understand which VAT rules apply to you when selling goods and/or services outside the UK.

Another useful link from HMRC   Place of supply of services (VAT Notice 741A) – GOV.UK (www.gov.uk)