Accounting for VAT on services between the UK and EU member states from 1 January 2021

1. Overview

From 1 January 2021 following the end of the transition period with the EU the VAT rules applying for supplying services between the UK and EU member states will become the same as the current rules for supplying services from the UK to outside the EU.
This guidance explains how VAT will be charged and accounted for on services supplied from the UK to the EU.

2. Who should read this guidance

You should read this guidance if you supply services from UK to EU member states.

2.1 Use and enjoyment rules

If you’re supplying services from the UK that come under use and enjoyment rules and are effectively used and enjoyed outside the UK, they will be outside the scope of UK VAT.

2.2 Business to consumer supplies of a professional, technical and intangible nature

If you’re supplying services that are treated as supplies from the UK to consumers outside the UK, your services are supplied where your customer belongs and so are outside the scope of UK VAT.

2.3 European Community Sales List

UK businesses are no longer required to complete an EC Sales List when supplying services to businesses located in the EU.

2.4 Tour Operators Margin Scheme

The Tour Operators Margin Scheme will continue to apply to all tour operators located in the UK.
From 1 January 2021 the margin on designated travel services which take place inside the EU will be zero rated in line with the current treatment of supplies that take place outside the EU. The margin on those enjoyed in the UK will remain taxed at the standard rate.

2.5 Selling digital services to and from the EU

UK businesses will no longer be able to use the VAT MOSS system in the UK and the current EU-wide VAT threshold for supplies of digital services to consumers will cease to apply to UK businesses. This means that EU VAT will be due on all supplies of digital services to EU consumers, regardless of the value of the sales.
If you’re selling digital services from the EU to the UK you will need to register and account for VAT.

2.6 Finance and insurance services supplied to persons outside the UK

If you make specified supplies from the UK to a person who belongs outside the UK you’ll be entitled to recover as input tax, VAT incurred on:

– financial services supplied to persons belonging outside the UK or directly related to an export of goods
– insurance services supplied to persons belonging outside the UK or directly related to an export of goods
– the making of arrangements for these specified supplies

VAT incurred before the end of the transition period that is used to make specified supplies to persons belonging in EU member states cannot be recovered.

3. International trains

The services provided for the operation of international trains and the loading, unloading and storage of goods carried on them will become zero-rated provided the service is physically performed in the UK.

VAT rules for supplies of digital services to consumers

Find out about the VAT place of supply rules if your business sells digital services to private consumers.

How to determine the place of supply and taxation

For VAT purposes the place of supply rules set a common framework for deciding in which country a transaction should be subject to tax.
For supplies of cross-border digital services to non-business consumers you should check:

– the location of your consumer
– whether it’s a digital service – if it is not, the general place of supply of services rules will apply
– whether your customer is a business or a private consumer
– if you are a UK business and the supply is not made in the UK, you’ll need to check the rules in the country of the customer, as you may have to register for VAT or its equivalent in the country

The place of supply of digital services

If you are a business making supplies of digital services to UK consumers, those supplies are liable to UK VAT. If you make supplies of digital services to consumers outside the UK these are not liable to UK VAT. They may be liable to VAT in the country where the consumer is based. If you supply digital services to consumers via a third party platform or marketplace, the digital platform is responsible for accounting for VAT on the supply instead of you. If your supplies are liable to UK VAT you will need to register for UK VAT if you are based outside the UK.

VAT accounting options for UK businesses supplying digital services to consumers in the EU

The place of supply will be where the consumer is located. You must either:

– register for the Non-Union VAT MOSS scheme in an EU member state
– register for VAT in each EU member state where you supply digital services to consumers

Defining digital services

Radio and television broadcasting services

These include:

– the supply of audio and audio-visual content for simultaneous listening or viewing by the general public on the basis of a programme schedule by a person that has editorial responsibility
– live streaming through the internet if broadcast at the same time as transmission by radio or television

Telecommunications services

This means transmission of signals of any nature by wire, optical, electromagnetic or other system and includes:

– fixed and mobile telephone services for the transmission and switching of voice, data and video, including telephone services with an imaging component, otherwise known as videophone services
– telephone services given through the internet, including Voice over Internet Protocol (VoIP)
– voice mail, call waiting, call forwarding, caller identification, 3-way calling and other call management services
– paging services
– access to the internet

It does not cover services just given over the telephone, such as call centre helpdesk services.

Electronically supplied services

These rules only apply to e-services that you supply electronically and includes things like:

– supplies of images or text, such as photos, screensavers, e-books and other digitised documents, for example, PDF files
– supplies of music, films and games, including games of chance and gambling games, and programmes on demand
– online magazines
– website supply or web hosting services
– distance maintenance of programmes and equipment
– supplies of software and software updates
– advertising space on a website

Services not affected by these rules

Using the internet, or some electronic means of communication, just to communicate or facilitate trading does not always mean that a business is supplying e-services. Using the internet for the following does not count:

– supplies of goods, where the order and processing is done electronically
– supplies of physical books, newsletters, newspapers or journals
– services of lawyers and financial consultants who advise clients through email
– booking services or tickets to entertainment events, hotel accommodation or car hire
– educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)
– offline physical repair services of computer equipment
– advertising services in newspapers, on posters and on television

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