VAT on B2B services from the UK to the EU
VAT on cross-border services can be confusing, especially since the UK left the EU.
For UK businesses supplying services to EU business customers, the key question is usually:
Where is the place of supply?
The place of supply determines which country’s VAT rules apply and whether UK VAT should be charged.
This guide explains the general position for UK businesses supplying business-to-business services to customers in the EU.
Start with the type of customer
The first step is to identify whether your customer is:
- A business customer, known as B2B
- A consumer or non-business customer, known as B2C
This article focuses on B2B services.
The VAT treatment for B2C services can be different, especially for digital services, electronically supplied services, land-related services, events, education, broadcasting and other special categories.
The general B2B rule
For most B2B services, the place of supply is where the business customer belongs.
This means that if a UK business supplies a general B2B service to an EU business customer, the place of supply is usually the EU country where the customer belongs.
As a result, the supply is normally outside the scope of UK VAT.
In practical terms, this usually means:
- You do not charge UK VAT
- You show the sale as outside the scope of UK VAT
- The EU business customer accounts for VAT in their own country under the reverse charge mechanism, where applicable
- You keep evidence that the customer is in business and belongs outside the UK
HMRC explains the place of supply rules in VAT Notice 741A.
What does “outside the scope of UK VAT” mean?
Outside the scope of UK VAT means the supply is not subject to UK VAT because it is treated as supplied outside the UK.
This is not the same as zero-rated VAT.
A zero-rated supply is still within the UK VAT system but charged at 0%.
An outside the scope supply is outside UK VAT altogether because the place of supply is not the UK.
This distinction matters for VAT reporting, invoicing and bookkeeping.
What should appear on the invoice?
For a general B2B service supplied from the UK to an EU business customer, the invoice will often show no UK VAT.
The invoice should clearly show:
- Your business details
- The customer’s business details
- A description of the services
- The value of the supply
- No UK VAT charged
- The customer’s VAT number, where available
- A note explaining that the reverse charge applies, where appropriate
Suggested wording:
“Reverse charge applies. Customer to account for VAT in their member state.”
Or:
“Outside the scope of UK VAT. Reverse charge may apply.”
The exact wording may depend on the customer’s country and the nature of the service.
Evidence that the customer is a business
You should keep evidence that your customer is a business customer.
This may include:
- The customer’s VAT number
- The customer’s business website
- Business correspondence
- Contract details
- Company registration details
- Purchase orders
- Other commercial evidence showing that the customer is acting in a business capacity
A valid EU VAT number is strong evidence, but it is not the only possible evidence.
However, if you cannot show that the customer is a business, the B2C rules may apply instead.
Checking an EU VAT number
Where your EU customer provides a VAT number, you should check that it is valid.
You can usually check EU VAT numbers using the European Commission’s VIES system.
It is sensible to keep a record of the check, especially for larger or ongoing customers.
If the VAT number is invalid or missing, you should review whether the customer is genuinely acting as a business and whether the B2B treatment is correct.
Reverse charge from the customer’s perspective
Under the reverse charge mechanism, the customer accounts for VAT in their own country rather than the supplier charging VAT.
For example, if a UK business supplies a general consultancy service to a VAT registered business in France, the UK business would usually not charge UK VAT.
The French business would account for French VAT under the reverse charge in France, subject to local rules.
From the UK supplier’s perspective, the important points are:
- The supply is usually outside the scope of UK VAT
- UK VAT is not charged
- The invoice should make the treatment clear
- The customer’s business status should be evidenced
Does Brexit change the basic service rule?
Brexit changed many VAT rules, particularly for goods.
However, for many B2B services, the broad place of supply rule remains familiar: the service is usually treated as supplied where the business customer belongs.
Since the UK is no longer part of the EU VAT system, UK businesses should no longer treat EU services as intra-EU supplies in the same way as before Brexit.
The supply is normally outside the scope of UK VAT where the general B2B rule applies.
Do UK businesses still need EC Sales Lists for services?
For most UK businesses, EC Sales Lists are no longer required for services supplied to EU customers after Brexit.
This is one of the practical changes compared with the pre-Brexit position.
However, businesses in Northern Ireland can have special VAT rules for goods. This article focuses on services supplied by UK businesses and does not cover the Northern Ireland goods rules in detail.
Does the sale count towards the UK VAT registration threshold?
If a supply is outside the scope of UK VAT because the place of supply is outside the UK, it will not normally count towards the UK VAT registration threshold.
This can be important for smaller businesses selling services internationally.
However, you should still keep proper records, and you may need to consider VAT or other registration obligations in the customer’s country depending on the nature of the services supplied.
Exceptions to the general B2B rule
Not all services follow the general B2B rule.
Some services have special place of supply rules.
These can include:
- Land and property related services
- Admission to events
- Restaurant and catering services
- Passenger transport
- Hire of means of transport
- Electronically supplied services
- Broadcasting and telecommunications
- Certain intermediary services
- Education and training
- Services connected with physical performance or location
HMRC’s VAT Notice 741A explains the general rule and the exceptions in more detail.
If your service falls into a special category, the VAT treatment may be different.
Land and property related services
Land-related services are a common exception.
If a service is directly connected with land or property, the place of supply may be where the land is located.
This can apply to services such as:
- Construction services
- Property surveys
- Estate agency services
- Architectural services linked to a specific property
- Property management services
- Some legal services relating to land
For example, if a UK business provides services directly connected with property located in Spain, the place of supply may be Spain, not the UK.
This may create local VAT obligations and should be checked carefully.
Digital and electronically supplied services
Digital services can also have special rules, especially where supplied to consumers.
For B2B digital services, the general B2B place of supply rule may often apply, but evidence of the customer’s business status remains important.
For B2C digital services, the rules can be very different and may create overseas VAT obligations.
If your business sells software, online subscriptions, digital downloads, online courses, platforms or electronically supplied services, the VAT position should be reviewed carefully.
Services supplied to EU consumers
This article focuses on B2B services.
If you supply services to EU consumers, the position may be different.
Some B2C services are taxed where the supplier belongs. Others are taxed where the customer belongs or where the service is physically carried out.
For example, digital services supplied to EU consumers can create EU VAT obligations.
Do not assume that the B2B reverse charge treatment applies to consumer sales.
Buying services from EU suppliers
The reverse charge can also be relevant when a UK VAT registered business buys services from an EU or other overseas supplier.
Where the place of supply is the UK and the overseas supplier does not charge UK VAT, the UK business may need to account for UK VAT under the reverse charge.
HMRC explains that the reverse charge applies to many B2B supplies of services received from overseas suppliers in VAT Notice 741A.
This can affect VAT returns and bookkeeping, even where no VAT appears on the supplier’s invoice.
VAT return treatment
The VAT return treatment depends on the type of transaction and the accounting software setup.
For a UK business selling general B2B services to an EU business customer, the sale is usually outside the scope of UK VAT.
For a UK business buying general B2B services from an overseas supplier, the reverse charge may require entries on the VAT return.
Because software packages can use different VAT codes, it is important to check that the correct VAT treatment is being applied in the bookkeeping system.
Incorrect VAT coding is a common source of errors.
Common mistakes
Common mistakes include:
- Charging UK VAT on a general B2B service supplied to an EU business customer
- Treating outside the scope supplies as zero-rated supplies
- Failing to keep evidence that the customer is a business
- Not checking whether a special place of supply rule applies
- Applying B2B treatment to a consumer customer
- Ignoring overseas VAT registration risks
- Incorrectly coding reverse charge purchases
- Assuming all services follow the same rule
- Confusing goods rules with services rules
- Using pre-Brexit processes without checking whether they still apply
Practical checklist
Before invoicing an EU customer for services, ask:
- Is the customer a business or a consumer?
- Where does the customer belong?
- Do I have evidence that the customer is in business?
- Does the customer have a VAT number?
- What type of service am I supplying?
- Does the general B2B rule apply?
- Is there a special place of supply rule?
- Should UK VAT be charged?
- Should the invoice mention reverse charge?
- Could there be a VAT obligation in the customer’s country?
- Is the transaction correctly coded in the bookkeeping software?
Example: UK consultancy service to an EU business
A UK consultancy business supplies strategic advice to a VAT registered business customer in Germany.
The customer is acting in a business capacity and provides a valid German VAT number.
Under the general B2B rule, the place of supply is where the customer belongs.
The UK business would normally:
- Issue an invoice with no UK VAT
- Treat the sale as outside the scope of UK VAT
- Include wording that the reverse charge applies
- Keep evidence of the customer’s business status
- Record the transaction correctly in its bookkeeping software
The German customer would account for VAT in Germany under local reverse charge rules.
Example: UK service linked to EU property
A UK business provides a service directly connected with a specific property in France.
Because the service relates to land, the place of supply may be where the property is located.
This means the general B2B rule may not apply.
The UK business should check whether French VAT obligations arise before issuing the invoice.
How CooperFaure can help
CooperFaure can help UK businesses understand the VAT treatment of services supplied to EU and overseas customers.
We can support with:
- Reviewing place of supply
- Checking whether the general B2B rule applies
- Identifying special VAT rules
- Reviewing invoice wording
- Checking VAT codes in Xero or other bookkeeping software
- Advising on reverse charge purchases
- Reviewing VAT return treatment
- Helping identify when overseas VAT advice may be needed
If your business supplies services to EU customers, or buys services from overseas suppliers, it is worth checking the VAT treatment before invoices are issued or VAT returns are submitted.