New VAT rules after Brexit: Buying and selling services from / to the EU (part 2 of 3)

Now that we are well into 2021 and the dust has settled on Brexit, we’re all getting used to the new VAT implications between the UK and the EU.

Due to the complexities of the new VAT rules, we have prepared a three-part guide to provide you with details on the new rules when trading with the EU.  This is part two, you can also read:

Part one:  Exporting and importing (including changes to trade with Northern Ireland)

Part three: Triangulation of goods

Post Brexit changes to VAT – What are the new rules for buying and selling services from / to the EU?


Supply of services to the EU under the general rule

If a UK business supplies services which fall under the general rule for the place of supply of services purposes, these are now treated as outside the scope of UK VAT when supplied to a customer outside the UK. The UK business would still include the sale in box 6 of the VAT return as you would previously.

This includes both B2B and B2C supplies.

An EC Sales List (ESL) is no longer required, and you do not need to put ‘This service is subject to the reverse charge’ on your sales invoice.


Receiving supply of services from the EU

The purchase of these services from the EU is still treated as outside the scope of UK VAT and subject to the reverse charge.

The purchase would be recorded in box 7 on the VAT return within the UK.  The UK business should also account for the sales tax in box 1 and claim back the VAT in box 4 (so net effect is £nil on the return), provided that the input VAT is allowable and can be claimed.

Purchases of services from outside the EU are, and always have been, subject to the reverse charge as well.


Supply of digital services to consumers

From 1 January 2021, UK suppliers of digital services to EU consumers should register in an EU member state of their choice to file a non-Union MOSS (mini one stop shop) return


Register for VAT in every member state where they have customers.


Supply of digital services to businesses

If a UK business supplies digital services to a business customer in the EU, this would fall under the reverse charge and the EU customer should account for the VAT in their country.

The invoice should state that “the supply is subject to the reverse charge”.

How can I find out more about the post Brexit changes to VAT?

The above cannot directly be relied upon and it is important that you seek confirmation/advice, relating to your business’ specific circumstances.  If you have any further queries about the new VAT rules between UK and EU or would like to know more, please contact us and our specialist tax team will be happy to help you.

There are also new VAT rules when importing and exporting goods from / to the EU – you can read our guidance for these circumstances (part one) here and for the triangulation of goods between the EU and other countries (part three) here.

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