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No VAT on (some) B2C services to EU customers

If you’re a UK-based business providing a service to a consumer living in the EU, you may no longer need to charge VAT on your invoices after the end of the Brexit transition period – saving your clients money and also helping you to win new business.

This news from HMRC is being welcomed by UK providers of “professional, technical, financial, intellectual or other intangible services” after a new directive stating from 1st January, 2021, some consumer services can be offered VAT free following the UK’s departure from the EU. The full list of service providers included in this directive may be found here

Currently, most services supplied to a B2C customer living in an EU country is subject to 20% VAT as the supplier is based in the UK.

2020 example:

HB Accountants manage the tax return of an individual living in Germany (customer lives within the EU) – VAT is applied

HB Accountants manage the tax return of an individual living in New Zealand (customer resides outside of the UK and the EU) – no VAT will be applied

VAT changes on 1st January 2021 

From 1st January 2021, if a customer does not reside in the UK but receives certain B2C services from a UK-based company, VAT will not be applied.  

Example after 1st January 2021:

HB Accountants manage the tax return of an individual living outside of the UK, for example, in Germany OR New Zealand – no VAT will be applied.

There is also no requirement for HB Accountants to register for VAT in the EU countries in which they operate, in this example, in Germany.

Be aware that UK businesses only supplying services to non-UK consumers will still need to be registered for VAT in the UK if the service provided would be subject to VAT if they had UK-based customers: however, this allows the business to reclaim tax on any related UK expenses.

Use this change to boost your business  

This change could be the catalyst for increasing your business with EU customers.

Without the additional VAT charge, your service charge will be lower and this could give you a competitive advantage.

If you would like to discuss whether your business could benefit from this directive, please contact Amy or call 01992 444466.

Every month we publish a range of blogs that give you access to information from experienced accountants.

If you would like a no obligation discussion about how we can help you and your business, please feel free to contact the team on 01992 444466.  We’re accountants for business and we’re here to help you grow.

We hope this information helps you and we are here for you during this difficult time. We will continue to keep you updated as the Government releases new information. Our business contingency plan is in place and we will do everything we can to support our clients during this uncertain period, please do not hesitate to contact us here if you have any concerns or queries.

Visit our COVID19 Business Hub for more information

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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above

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HB Accountants is the trading name of HBAS Limited, a company registered in England with registration number 5085258. The registered office of HBAS Limited is Plumpton House, Plumpton Road, Hoddesdon, Hertfordshire EN11 0LB, England. Registered for VAT number 866062806.

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