From 1st January 2021, following the end of the UK’s transition period with the European Union, the VAT rules between Britain and the EU member states will become the same as the existing rules for supplying services from the UK to outside the European Union. This guide will explain how the VAT is now charged and accounted for on services that are supplied from the UK to the EU.

United Kingdom VAT Rules

Below are listed the VAT rules of the United Kingdom.

  • VAT (valued added tax) is charged on most goods and services that are traded within the UK and EU.
  • Businesses need to pay VAT when they bring their goods in the United Kingdom.
  • UK VAT is not charged at the point of sale.
  • For services, the “place of supply” rules determine the countries where businesses need to charge and account for VAT.

VAT Rules from 1st January 2021

The United Kingdom continues to charge VAT, and the rules concerning the domestic transactions in the UK to apply businesses in the same way as they did before. On the whole, VAT procedures remain the same as those before 31st December 2020; however, there have been some changes to the VAT rules after the Brexit between the UK and EU member states.

Supplying Services to the European Union Member States

The supply of services to member states in the EU from 1ST January 2021 is treated the same way as countries outside the EU when it comes to VAT purposes. The “place of supply” rules continue to be applied but there have been some changes to them. For businesses based in the UK, supplying digital services to non-business customers in the EU, the place of supply is wherever the customer lives. These services are subject to VAT in the EU states where the customer lives.

For financial and insurance companies based in the UK, the input VAT deduction rules changed from 1st January 2021, and supplies of services that were formerly exempt now follow the same rules when it comes to supplying such services to consumers who reside outside the European Union.

For a UK company that is supplying B2C or B2B services to the EU, if the particular services all under the “place of supply” rule, then the services are outside the parameters of VAT. The UK-based company should still include the sale in their VAT returns. However, an EC list will not be required. To supply digital services, companies based in the UK should register for the non-union scheme or register for VAT in every EU member state where they supply their services.

If a UK-based company provides digital services to the EU, then this would fall under the reverse charge category, and the invoice should mention that the supply falls under this category. The EU customer will then account for the VAT in their own country.

Finding More About Brexit Changes to VAT

New VAT rules can always be implemented when importing and exporting goods from the EU. For more updated information upon the changes to VAT, it is important that businesses seek confirmation relating to their specific circumstances.

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