See the Domestic
Reverse Charge mechanism Help topic for background information. Opera Help
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The reverse charge for services received from outside the UK is a simplification measure to avoid the need for suppliers to register in the member state where they supply their services. If you’re a UK supplier providing services in another member state you should check with your customer and that member state how their rules work.
If you’re a UK recipient of services from a non-UK supplier, the following rules apply to you.
The reverse charge for services applies where:
The place of supply is the UK
The supplier belongs outside the UK
You belong in the UK
The supply is not exempt (this includes exempt supplies subject to an option to tax)
You’re VAT registered in the UK.
See the Domestic
Reverse Charge mechanism Help topic for background information.
Please visit www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a to find out more about the rules for the place of supply of services (VAT Notice 741A).
The reverse charge provisions apply to transactions between VAT registered businesses in different EC countries that are subject to the reverse charge for services mechanism. You must contact HMRC to find out whether you are affected by these provisions.
The customer of the service must update their VAT Return as though they are both the customer and supplier. The supplier of the service must update both the VAT Return and the EC Sales List.
Receivers of services from suppliers outside the UK |
Businesses that receive services must include these purchases on their VAT Return using the standard rate of VAT:
|
Suppliers of services to customers outside the UK |
Businesses that provide services must include these sales on their VAT Return sing a zero-rated VAT code:
The EC Sales List must also be updated. |
HMRC requires that the VAT Control Account in the Nominal Ledger is updated with the output tax and input tax.
Dr |
Cr |
|---|---|
The amount of the Input VAT you are normally entitled to account for. |
The amount of the Output VAT calculated on the full value of the intra-EC supply of services. |
The time of supply, or the tax point, determines when VAT is to be accounted for.
The tax point for single services is either when the service is completed or when it is paid for, whichever is earlier
The tax point for continuous services is the end of the billing period. So if a customer is billed for the services monthly, the tax point is the end of that month.
The EC Sales List includes the supply of goods between VAT registered businesses in EC countries and also the supply of services if the business transaction is subject to the reverse charge. The business that provides the service must submit the EC Sales List to HMRC.
The EC Sales List must also include this information for services transactions:
The VAT registration number of the businesses that received the service
The total value (excluding VAT) of those supplies for each customer
The indicator '3' for services.
The default reporting frequency for the EC Sales List will be monthly for services, and for goods over a specified threshold. Businesses may be able to opt to submit quarterly EC Sales Lists for services.
Setup: See the Setting up reverse charge for services received from outside the UK Help topic.
