VAT for International Services

Dealing with transactions made between different countries can be a minefield of VAT complexity raising questions such as:-

• VAT or no VAT
• Who is responsible for accounting for the VAT?
• Do I have to account for VAT on services received?
• Do I have to complete a European Sales List (ESL) for services made?

The answers to these questions are dependent on a number of factors such as:-

• the exact nature of the service
• where the customer and supplier ‘belong’, which can be difficult to judge in relation to large organisations
• are customers business customers or private individuals
• does consideration need to be given as to where the services are ‘used and enjoyed’
• has all the necessary evidence been obtained to justify charging no VAT?
• does an ESL have to be completed?
• who is responsible for accounting for the VAT if VAT is due – supplier or customer?

Certain specified services related to finance and insurance receive a different VAT recovery treatment when they are made outside the EU rather than inside the EU. This means that some businesses that would otherwise recover no VAT when making these supplies solely within the EU may be entitled to recover VAT on costs if the supplies are made outside the EU.

The method used to calculate the recovery of VAT costs can vary and may lead to tailored arrangements that need to be agreed with HMRC prior to their implementation.