B2C professional services to EU from 1/7/2021

Since Brexit, the supply of professional services listed within section 12.2 of VAT Notice 741 by UK suppliers to EU consumers (B2C) are subject to an exception to the general UK place of supply of service rules and are therefore deemed to be made where customer belongs and so taxable in that EU Member State.

However, rather oddly, the EU rules means that the service is deemed made in the UK and so the service is technically not taxed anywhere!

This anomaly will change from 1/7/2021 when the EU change their Place of Supply of Services rules.

The change will mean that both the UK and EU treatment of these type of services is consistent in that both will deem the supply to be made where the customer belongs and so, whilst the supply will continue to be outside the scope of UK VAT, the supply will instead be subject to VAT in the EU Member State in which the customer belongs.

As the supply cannot be dealt with under the reverse charge procedure by the EU customer this would ordinarily give the UK supplier an immediate requirement to register for VAT in each EU Member State in which their B2C customers belong.

VATMOSS

However, to save the supplier from a potential requirement to register for VAT in multiple EU countries, the current VATMOSS system will be expanded and to not only include B2C supplies of digital services but also any other type of B2C supply of services where, under the Place of Supply of Services rules, the service is deemed made in the EU.

The system will be renamed ‘One Stop Shop’ and will operate in the same way as the current VATMOSS systems works; with Union OSS for suppliers based in the EU and Non-Union OSS for suppliers based outside the EU.

As is currently the case for VATMOSS, suppliers based outside the EU will have no €10000 threshold for OSS use and will need to register for VAT in one of the remaining EU Member States in order to access EU online systems and then register for Non-Union OSS but EU guidance appears to advise that non-EU based suppliers do not need an agent in the EU country to do this for them or to submit their OSS returns. 

[contact-block]

Related News Articles

Navigating Tax Changes: High-Income Child Benefit Charge and Other Updates 

THE HIGH-INCOME CHILD BENEFIT CHARGE In an effort to reduce unfairness, the thresholds for the high-income child benefit charge (HICBC) will be increased from 2024/25. You may have to pay the HICBC if you are considered to have ‘high income’ and child benefit is being paid in relation to a child that lives with you,…

CIOT Responds to HMRC Regarding the Current Problems with R&D Tax Relief

In the summer of 2023, HMRC and the Chartered Institute of Taxation (CIOT) exchanged lengthy correspondence about the approach being taken by HMRC relating to R&D tax relief claim compliance checks. The CIOT expressed concern about a number of tactics being employed; HMRC’s response was to largely defend the measures being undertaken. Several months have…

The VAT threshold: Should it be changed, and do I need to register for VAT?

The current UK VAT threshold is £85,000. This threshold is due to stay in place until at least April 2016, meaning that by that time the VAT threshold will not have changed for at least 9 years. On our advice line, we receive queries daily from businesses that want to remain below the VAT threshold,…