Selling creative services abroad: how VAT works for overseas clients
Design, production and consultancy for clients outside the UK is often outside the scope of UK VAT, but not always. How the place of supply rules work, the evidence to keep and the exceptions to watch.
More creative businesses sell abroad than ever: a London studio editing for a New York network, a designer working for a start-up in Berlin. The VAT question is the same each time. Do you charge UK VAT on the invoice?
The general rule for business customers
For most services supplied to a business, the place of supply is where the customer belongs. If your customer is a business established outside the UK, the supply is outside the scope of UK VAT and you do not charge it. In the EU and many other countries, the customer then accounts for any local VAT itself, under what is called the reverse charge.
Do you charge UK VAT?
- Who is the customer?A business, or a private individual?
- Where do they belong?For a business: where it is established, or the branch the work is for.
- Is there a special rule?Land, admission to events and some other services have rules of their own.
- Invoice and keep evidenceA business outside the UK: no UK VAT, with proof of who and where they are.
Private customers are different
For services to private individuals, the general rule is the other way round: the place of supply is where the supplier belongs. A UK business therefore usually charges UK VAT to a private customer, wherever the customer lives, unless one of the exceptions in HMRC’s guidance applies.
Evidence is what protects you
- Check that the customer is in business, for example from its VAT or tax number and its website.
- Record where it is established, and which branch the work is for.
- Keep the contract and correspondence with the invoice.
Charging no UK VAT does not cost you the VAT on your own costs: HMRC’s guidance allows input tax on supplies made outside the UK that would be taxable if they were made here, subject to the normal rules. Getting the treatment right at the start of a client relationship is far easier than correcting a year of invoices later.
This insight is general information, not advice for your circumstances. Talk to us before acting on it.