Q&A: VAT changes to B2C professional services

In our regular Q&A series, Croner Taxwise, VAT adviser, Priyesh Mistry, explores whether accountants continue to charge UK VAT on tax returns for individuals living in the EU, or if they become the same as the work for non-EU clients

Q. As an accountant we sometimes prepare tax returns for individuals living in the EU. From 1 January 2021 do we continue to charge UK VAT on those invoices, or will they become the same as the work we do for non-EU clients? Also, will there be any changes to the Use and Enjoyment provisions after the transition period ends?

A. When a UK service provider is invoicing a non-EU individual for services listed within Value Added Tax Act 1994 (VATA94) schedule 4a, paragraph 16(2), the place of supply is where the individual resides, therefore, outside the scope of UK VAT. See VAT notice 741a sec 12.

Schedule 4a, para 16(2) covers the following supplies:

  • transfers and assignments of copyright, patents, licences, trademarks and similar rights;
  • acceptance of any obligation to refrain from pursuing or exercising a business activity;
  • advertising services;
  • services of consultants, engineers, consultancy bureaux, lawyers, accountants, and other similar services – data processing and provision of information, other than any services relating to land;
  • banking, financial and insurance services;
  • the provision of access to, or transmission or distribution through, natural gas and electricity systems and heat or cooling networks and the provision of other directly linked services;
  • supply of staff;
  • letting on hire of goods other than means of transport; and
  • emissions allowances.

From 1 January 2021, this will extend to all non-UK consumers. This is confirmed in HMRC’s policy paper. ‘If you’re supplying services that are treated as supplies from the UK to consumers outside the UK, your services are supplied where your customer belongs and so are outside the scope of UK VAT.’

The Use and Enjoyment provisions apply to certain supplies of services and ensure VAT is accounted for where they are consumed. The following services are covered by the rules:

  • The letting on hire of goods – including the means of transport;
  • B2B electronically supplied services;
  • B2B telecommunication services;
  • B2B repairs to goods under an insurance claim; and
  • Radio and television broadcasting services.

The current use and enjoyment provisions apply where the place of supply would be:

  • The UK, but the services are effectively used and enjoyed outside the EU, or
  • Outside the EU, but the services are effectively used and enjoyed in the UK.

Where these services are consumed both in the UK and by that customer outside the EU, the supply is apportioned, and VAT applied to the extent that they are consumed in the UK.

From 1 January 2021, the use and enjoyment rules will apply to the following: where the place of supply would be:

  • The UK, but the services are effectively used and enjoyed outside the UK, or
  • Outside the UK, but the services are effectively used and enjoyed in the UK.

HMRC have confirmed, after the transition period ends, ‘If you’re supplying services from the UK that come under use and enjoyment rules and are effectively used and enjoyed outside the UK, they will be outside the scope of UK VAT.’ 

Useful links:

Accounting for VAT on services between the UK and EU member states from 1 January 2021

HMRC’s policy paper

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