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Sales of services abroad

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The following information is for general guidance only and should not be taken as definitive VAT advice, since individual circumstances may vary. To determine the VAT treatment for your particular transactions please refer to HMRC guidance or seek tax advice from an accountant.

Introduction

If you are a UK business and sell a service to an overseas customer, you need to determine the place of supply (using HMRC VAT Notice 741a) to know whether or not the transaction is outside the scope of UK VAT, regardless of where the customer is located.

Place of supply is the UK: UK VAT is due

If the place of supply is the UK, it is subject to UK VAT and VAT should be charged in the normal way for a domestic UK sale.

Place of supply is outside the UK: Outside the scope of UK VAT

If the place of supply is outside the UK, it is outside the scope of UK VAT. However, HMRC require the net value of sales that are outside the scope of UK VAT under place of supply rules, to be included in Box 6 of the VAT return (according to para 3.7 of HMRC VAT Notice 700/12).

Therefore enter the sale in the same way as described in Entering a zero-rate sale. This is not actually a zero-rated sale for VAT purposes, but this will serve the purpose of including the sale in Box 6 of the VAT return.

Other points

You might have obligations for sales tax in the country where the supply is determined to take place. If so, the foreign sales tax can be accounted for as described in VAT or sales tax due in other countries).

If the customer is required to account for reverse charge VAT/sales tax of their country, and that country's tax authority requires you to have certain wording on the sales invoice referring to reverse charge, you can create an invoice template with the required wording in the same way as described in Creating an invoice template for DRC services. Although this template refers to UK domestic reverse charge services, the same principles apply in creating a template for foreign reverse charge services and you just need to adapt the wording.

For supplies of services, Great Britain and Northern Ireland are both considered to be within the UK for VAT purposes and follow the same rules.