ICAEW.com works better with JavaScript enabled.

This is exclusive content

How is VAT dealt with and reported for a UK client's UK providing services in Europe?

Q: My client is a sole trader resident in the UK and supplies telemarketing services to a business in Belgium; she carries out some of the work herself in the UK and sub-contracts the rest to a French VAT-registered consultant. How is VAT dealt with and reported on my client's UK VAT return?

A: The place of supply of B2B IT consultancy services follows the basic rule  where the customer belongs. This is irrespective of where the work is physically performed or by who, so will be Belgium in this case and therefore outside the scope of UK VAT. As your client and its customer are in different EU countries, the basic rule requires the business customer to self-account for this VAT itself under the reverse charge mechanism on its Belgian return. Your client's invoice should state something like "These services are subject to reverse charge" and, if the customer is VAT registered, your client should also quote the customer's VAT number and report the sale on an EC Sales List. The sale will go in Box 6 of your client's UK VAT return. The French subcontractor should be doing the same on its invoice to your client as the place of supply is the UK (where your client belongs). Your client has to account for UK VAT on this under the reverse charge by putting the value of the purchase in Box 6 & Box 7 (but not 8 or 9), 20% of that in Box 1 and the recoverable amount (subject to normal recover rules, ie. 100% recoverable in this instance) in Box 4.-As a builder, the rate of VAT you charge for your services will normally determine the rate of VAT you charge on any goods you ‘incorporate’ in the building (or its site). So, if your services are zero-rated, then so are the goods. However this is only the case where the goods that you are incorporating are ‘building materials’. If the goods are not ‘building materials’, you must charge VAT at the standard rate on the supply of those goods. Carpets and integrated white goods are not building materials therefore the builder would charge VAT to the developer on these. The builder would however be able to zero rate the installation of these materials (see para 11.2 of VAT Notice 708). Since the builder is using the materials to making a taxable supply, the input tax is recoverable.