Value Added Tax

Reverse charge ― buying in services from outside the UK

Produced by Tolley
  • 04 Apr 2022 11:47

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Reverse charge ― buying in services from outside the UK
  • What is the reverse charge?
  • When are services subject to the reverse charge?
  • Difference for general rule and special rule services
  • How does the supplier invoice reverse charge services?
  • How does the customer account for the reverse charge on a VAT return?
  • How does the reverse charge affect unregistered customers?
  • Practical points ― reverse charge on services from outside the UK

Reverse charge ― buying in services from outside the UK

This guidance note covers the reverse charge that applies to services that have been bought in from outside the UK.

For an overview of VAT and international services more broadly, see the International services ― overview guidance note.

For in-depth commentary on the legislation and case law in relation to the reverse charge, see De Voil Indirect Tax Service V3.231.

What is the reverse charge?

Certain services are subject to a reverse charge when they are bought in from outside the UK. This means that instead of the supplier being required to register and account for VAT on its supply of services as normal, the obligation to account for VAT on the services is actually ‘shifted’ to the customer. The customer therefore treats the service as if it were supplied both to and by itself. In other words, the customer must ‘self-account’ for the VAT on its purchase.

The customer is still able to recover the VAT that it charges to itself under the reverse charge subject to the normal VAT rules for input tax recovery. This means that if the customer is entitled to recover all of its VAT, the reverse charge ends up being a simple administrative entry on its VAT return. However, if the customer is not entitled to recover all of its VAT (for example because it is partly exempt), then the reverse charge will have the effect of increasing the amount of VAT due to HMRC.

The

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