B2B Place of Supply Rules: When to Charge UK VAT

A brand in Berlin wants a campaign. A start-up in New York needs a rebrand. A production company in Dublin hires you for a few weeks of copywriting. Then the invoice question lands: do you charge UK VAT or not?

The answer comes down to the place of supply rules. They sound dry, but once you get the basic logic, most B2B invoices become straightforward. This guide walks through how the rules work, where the exceptions sit and how to keep your paperwork in order.

What “place of supply” actually means

VAT is a tax on consumption, so the rules try to work out where a service is deemed to be supplied. If the place of supply is the UK, UK VAT is generally due. If it is outside the UK, the supply is usually “outside the scope” of UK VAT, which means you do not charge it.

Notice the phrase “deemed to be”. The place of supply is not always where you physically work or where the work is delivered. For services, it is a legal concept with its own set of rules, and those rules depend heavily on one question: is your customer a business or a consumer?

The general rule for B2B services

For most business-to-business services, the place of supply is where the customer belongs. This is often called the “general rule”.

In practice:

• If your business customer belongs in the UK, the supply is in the UK and you charge UK VAT (assuming you are VAT registered and the service is not exempt or zero-rated).
• If your business customer belongs outside the UK, the supply is outside the scope of UK VAT, so you do not charge UK VAT.

This applies to the typical services creative and marketing firms provide, such as design, branding, copywriting, advertising, social media management, web development, consultancy and video production for a business client.

It does not matter where you are based or where the work is physically carried out. What matters is where your customer belongs.

How to work out where your customer “belongs”

For a business customer, the key is usually where the business has established itself. The sensible approach is:

1. Identify the contracting entity. Which business is actually receiving the service under your contract or engagement letter? That is the customer for VAT purposes.
2. Look at where that entity is established. This is typically its main place of business or registered office.
3. Consider whether a fixed establishment is involved. If the service is used by a branch or fixed establishment in a different country from head office, the place of supply can be that establishment instead. This comes up with larger corporate clients and is worth checking if the contract is with one entity but a different local team is the real recipient.

A business with several offices is the situation where it pays to check. A UK-based agency working for a UK branch of an American company, for instance, may need to treat the customer as belonging in the UK, depending on how the contract and the use of the service are set up.

Proving your customer is a business

The B2B rules only help you if the customer really is a business, and you need to be able to show it. Evidence that tends to carry weight includes:

• A valid business registration or VAT number (for overseas customers where one exists)
• A company name and address on the contract, purchase order and invoice
• Business email domains and a website that matches the entity
• Commercial documentation showing they are carrying on a business

For customers in countries with a VAT or GST system, asking for their tax number is good practice. For others, a record of the company details and a note on how you satisfied yourself that they are a business is a good habit. Keep it on file. If HMRC ever asks why you did not charge VAT, you want an easy answer.

If you cannot establish that the customer is a business, treat the sale as B2C, where different rules apply and UK VAT is often charged.

When you do charge UK VAT on B2B services

Assuming you are VAT registered, you will normally charge UK VAT at the appropriate rate (usually the standard rate for creative and marketing services) when:

• Your customer is a UK business, or belongs in the UK under the rules above
• The service is received by a UK fixed establishment of an overseas business and that establishment is the real recipient
• A specific exception moves the place of supply to the UK (see below)

If your customer is UK VAT registered, they can usually reclaim the VAT you charge, so it is generally a cash-flow matter rather than a real cost for them.

When you do not charge UK VAT

You generally do not charge UK VAT when:

• The customer is a business that belongs outside the UK
• No specific exception overrides the general rule
• You hold evidence supporting the customer’s status and location

On the invoice, make it clear that no UK VAT is charged. A short note such as “Outside the scope of UK VAT: customer to account for any local VAT under the reverse charge” works well. Many overseas customers will account for VAT themselves under their local reverse charge rules, which is their responsibility rather than yours.

These sales still need to be recorded properly. Outside the scope sales are not taxable turnover, but they are normally included in the total value of sales in Box 6 of your VAT return, so keep them in your records and report them correctly.

Exceptions to the general rule

The general rule has some exceptions, and a few could catch creative businesses out. The main ones to be aware of are:

• Services connected to land or property. If you supply services relating to a physical location, such as designing an interior or producing creative work tied to a specific property, the place of supply can be where the land is.
• Admission to events. Granting entry to a conference, exhibition or similar event is treated as supplied where the event takes place. If you run ticketed events, check this carefully.
• Hiring out of transport and some other specific services. These have their own rules and are less likely to affect a creative business, but they exist.
• Certain services to consumers. Where the customer is not in business, different rules apply, so make sure you have established who you are really dealing with.

If you are in any doubt, check HMRC’s official guidance, VAT place of supply of services (Notice 741A), which sets out each category in detail.

Recovering VAT on your own costs

Here is a point that surprises people. Even where you do not charge UK VAT because your customer is overseas, you can usually still recover UK VAT on costs directly linked to those sales, provided the services would have been taxable if supplied in the UK. That is the “right to deduct” principle.

For example, if you buy software subscriptions, hire freelancers or pay for stock imagery to deliver a project for an overseas business customer, the VAT you pay on those costs is generally still recoverable. That helps your margins on international work.

Practical tips for marketing and creative businesses

A few habits will save you headaches:

• Add customer details to your onboarding process. Capture the legal entity name, address, country and any tax number at the start of every new client relationship.
• Check the contract. Make sure the party named in your agreement is the party actually receiving the service.
• Be careful with agencies and intermediaries. If you work through an agency, the agency is often your customer, not the end client. The place of supply usually follows the entity you contract with.
• Use clear invoice wording. State when no UK VAT is charged and why.
• Keep an eye on registration. Outside the scope sales generally do not count towards the UK VAT registration threshold, but your UK sales do, so monitor your figures with your accountant.
• Check overseas obligations. Selling to a business abroad often means that customer accounts for the VAT, but other countries sometimes have registration rules of their own, so do not assume you are free of local requirements for every type of supply.
• Keep everything. Contracts, emails, tax numbers and invoices should be stored in line with your record-keeping duties.

Common mistakes to avoid

• Charging UK VAT on everything out of caution, which can overcharge overseas customers and damage relationships
• Charging no VAT to anyone abroad without checking whether they are a business
• Ignoring fixed establishments or the real recipient of the service
• Treating events and location-based work the same as standard creative services
• Failing to keep proof of customer status

Getting support with VAT on international work

VAT on cross-border services can get complicated quickly, especially for growing creative businesses with international clients, multiple entities or event-based work. If you want to make sure your invoicing and returns are right, take a look at our Compliance service, where we help businesses stay on top of VAT and other obligations without the stress.

Not sure whether you should be charging UK VAT on your overseas projects? If your invoices, client contracts or VAT returns could do with a second pair of eyes, book a discovery call and we’d be happy to help.