How has Brexit affected VAT on the supply of services?
Businesses buying and selling goods to customers in the EU have been inundated with new procedures and guidance from HMRC. By contrast, there is little information about the effect of Brexit on VAT for businesses in respect of charges they make for the supply of services.
Supply of services
For services you supply to EU customers you must first decide where the supply takes place for VAT purposes. This is not straightforward. Just because your business is in the UK it doesn’t mean that supplies you make are subject to UK VAT.
Since Brexit, the general VAT rule is that for business-to-business (B2B) supplies, i.e. where your customer is a business, the place of supply is where they belong. The supplies are outside the scope of UK VAT.
Trap: Special rules apply to some types of service so that they are treated as supplied in the UK even if your B2B customer is overseas. For example, certain services relating to UK land and buildings. You must charge your customer the appropriate rate of VAT.
The general rule for B2C services to EU customers continues to apply for post-Brexit services. The rule is that the place of supply is the UK, i.e. where your business is located. You must therefore charge VAT at the rate appropriate to the type of service you provide.
Trap: Special rules continue to apply to some types of B2C services. For example, electronically supplied products such as internet downloads. The special rules treat the supplies as made where your customer belongs.
The VAT “mini one-stop-shop” which allowed you to account for VAT that you charged on B2C electronic services to customers in the EU is no longer available for post-Brexit supplies. This means you must register an account for EU VAT as already mentioned in the Trap above.