VAT implications on supplying services abroad (note - different rules apply for supplying goods)

A question we get asked a lot is: as a VAT registered contractor working through a UK Limited Company, do I need to charge VAT on my invoice when I supply my services to an overseas company? The answer is that it depends!

It depends on the “place of supply” of your services.

If your place of supply is in the UK then you need to charge and report UK VAT.
If your place of supply is in a country other than the UK then you do not need to charge VAT as it is outside the scope of VAT.

How to determine the place of supply

The general rule for working this out is if you supply services to a:

Business customer: the place of supply is normally the place where the customer belongs
Non business customer: the place of supply is normally the place where the supplier belongs

Therefore, for most contractors, the place of supply will be where the customer belongs.

The customer will belong in the UK if:

their business establishment (the head office or only office) is in the UK, and they have no fixed establishments (subsidiary offices or agencies) in other countries
their business establishment is in the UK and they have fixed establishments in other countries, but the UK office is the one mainly concerned with supplying services
their business establishment is not in the UK but they have a fixed establishment in the UK which is the one where you supply services from
they do not have either a business or fixed establishment in the UK or elsewhere, but their business is a corporate body (for example, a limited company) which is registered in the UK
they do not have a business or a fixed establishment in the UK, or anywhere else, but the UK is their usual place of residence

If none of these apply, then it is likely that the customer belongs outside of the UK and therefore the place of supply will be in the country the customer is based in.

For Example:

If the customer has a head office in the UK but you are contracting to the French subsidiary which has a fixed office based in France then it is likely that the place of supply is France not the UK.