Purchasing services from outside the UK

From 1 Jan 2021

Following the end of the Brexit Transition Period purchases from suppliers in the EC are treated in a similar manner to those from the rest of the world. Please see the Import Export Hub for current information.

Most services that are purchased from overseas suppliers are subject to VAT using a mechanism called the Reverse Charge (SERVICES TAX on CUFS).

What is the Reverse charge?

The reverse charge applies to almost all purchases of services from overseas suppliers, except exempt supplies, excepted supplies and the ‘Use and Enjoyment’ rules (see below for further detail).

The overseas supplier should not charge VAT on its invoice. This is not as beneficial as it might seem because the University is required by law to charge itself VAT at the UK standard rate of 20% (if the services would have been subject to standard rate VAT if purchased in the UK).  This puts the University in the same position as if we had received the supply from a UK supplier rather than from one outside the UK.

You will need to provide the University's VAT number (GB 823 8476 09) to demonstrate you are a business customer or the supplier may charge you VAT at the rate applicable in their country.

To enter an invoice for services bought from outside the UK on CUFS you will need to enter the amount of the invoice, enter £0 in the tax control box and then attribute the invoice to the tax code of 'SERVICES TAX'.

For example, if the service you have purchased would have been charged plus VAT if it had been supplied by a UK supplier, you should self-charge VAT as follows:

 If you have an invoice for £100

  • Enter £100 in the invoice amount box.
  • Enter £0 in the Tax Amount box.
  • Select Services Tax as the VAT rate.
  • The system will automatically then calculate the Reverse Charge VAT in the distributions.

Examples of common service purchases in the University:

  • Consultancy / legal services supplied by an overseas supplier
    This is subject to VAT if supplied in the UK and therefore you should apply the reverse tax charge. SERVICES TAX should be selected on CUFS.
  • Sub-contracted services
    For example, laboratory testing services purchased from overseas.  If this would be subject to VAT if supplied in the UK, you should apply the reverse charge. SERVICES TAX should be selected on CUFS.

Software licences
This will depend on where the service is consumed. (See ‘Use & enjoyment’ below).  If used by the University in the UK (most likely), the University should apply the reverse charge – SERVICES TAX. If used outside the UK, you should expect to be charged foreign VAT. We await confirmation of these post-Brexit rules from HMRC.

0% (zero-rated) & EXEMPT purchases - no Reverse Charge VAT applicable

Where services would be taxed in the UK at 0% (Zero-rated) eg electronic publications (e-books, e-journals etc), then the reverse charge does not apply and the correct CUFS code to use is NO UK VAT.

Where the services being purchased would be treated as EXEMPT in the UK (eg education), the reverse charge does not apply.  These services should be coded to NO UK VAT.

Excepted items - no Reverse Charge VAT applicable

  • Services relating to land – expect VAT to be charged in country where land located.
  • Passenger transport – specific rules, depends on facts.
  • Right of admission to cultural/educational events including conference, seminar and course fees – expect VAT to be charged in country where event is located.
  • Catering services – VAT due where catering physically takes place.
  • Hire of goods used outside the UK – expect VAT to be charged where goods are located.
     

‘Use and enjoyment’

Anti avoidance rules called ‘use and enjoyment’ are intended to make sure taxation takes place where certain services are consumed.  They aim to prevent either non- taxation or double taxation.

The services covered by these rules are:

  • the letting on hire of goods (including means of transport)
  • electronically supplied services (Business to Business only)
  • telecommunications services (Business to Businessonly)
  • repairs to goods under an insurance claim (Business to Business only)
  • radio and television broadcasting services

You may be charged overseas VAT on the above where they are consumed overseas.

Page updated 1 Dec 2020

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