There has been an added twist on VAT rules for invoicing overseas clients post-Brexit. Business to business (B2B) supplies of professional services, such as those of an accountant were and continue to be treated as being supplied where the recipient belongs, in line with the place of supply of services general rule; a different treatment used to apply if the recipient were a non-resident individual (B2C).
Pre-Bexit treatment
Pre-Brexit treatment has differentiated between EU and non-EU residents. Schedule 4A paragraph 16 of the VAT Act 1994 provided for the supplies of professional services to non-EU consumers to be supplied where the customer belonged and hence outside the scope of UK VAT; whereas supplies to EU consumers were taxed under the B2C general rule where the supplier belonged, so subject to UK VAT.
Post-Brexit treatment
Post-Brexit, Schedule 4A paragraph 16 has now been extended to include all overseas B2C supplies of professional services regardless of whether the recipient is EU or non-EU resident. This is now confirmed in the updated VAT Place of Supply of Services manual (https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/vatposs13000) which also details the other services covered by the same legislation.
It should be noted that for VAT purposes an individual is deemed to belong according to HMRC as follows: “The usual place of residence of a private individual is not defined in the law. We interpret the phrase as meaning the one country where the individual spends most of their time for the period in question. It is likely to be the country where the individual has set up their home, lives with their family and is in full time employment.”
