VAT and Overseas Customers: What to Charge

The Basics: Place of Supply

VAT is charged based on where the supply is deemed to take place — the "place of supply." For UK businesses selling to overseas customers, this determines whether you charge UK VAT, the customer's local VAT, or no VAT at all.

The rules differ significantly between goods and services.

Selling Goods Overseas

Exports to Non-EU Countries

Goods exported outside the UK (and outside the EU) are zero-rated for VAT purposes. You charge 0% VAT but must have evidence of export (shipping documents, customs declarations).

Goods to EU Countries (Post-Brexit)

Since Brexit, the UK is outside the EU's single market. Goods sent to EU customers are treated as exports:

• B2B (to VAT-registered EU businesses): Zero-rated. The EU business accounts for VAT in their own country under the import rules.
• B2C (to EU consumers): The EU's Import One-Stop Shop (IOSS) scheme may apply for goods valued under €150. Otherwise, the customer pays import VAT on delivery.

Northern Ireland Protocol

Northern Ireland follows different rules under the Windsor Framework. Goods moving from Northern Ireland to the EU follow EU single market rules (no export declaration needed). Goods from Great Britain to Northern Ireland may require customs declarations.

Selling Services Overseas

B2B Services (Business to Business)

For most services supplied to business customers outside the UK, the place of supply is where the customer belongs. This means:

• No UK VAT is charged
• The customer accounts for VAT in their own country under the reverse charge mechanism
• You include these sales in Box 6 of your VAT return but not in Box 1

Your invoice should state "Reverse charge: customer to account for VAT" and should not include UK VAT.

B2C Services (Business to Consumer)

The default rule for B2C services is that the place of supply is where the supplier belongs — i.e., the UK. This means you charge UK VAT at the standard rate.

Exceptions include:

• Digital services to EU consumers: These are supplied where the customer is, not where you are. You may need to register for VAT in the EU (or use the non-Union One-Stop Shop scheme).
• Services relating to land: Supplied where the land is located.
• Admission to events: Supplied where the event takes place.

Practical Steps for Overseas Sales

1. Determine whether your customer is a business or consumer. Ask for their VAT registration number.
2. Identify the type of supply. Goods or services? What kind of service?
3. Apply the correct place of supply rule.
4. Issue the correct invoice. Include or exclude VAT as appropriate, and add relevant notes (e.g., "Outside the scope of UK VAT" or "Reverse charge applies").
5. Keep evidence. For goods exports, keep shipping and customs documentation. For services, keep records of the customer's business status and location.

Record-Keeping

Even when you don't charge UK VAT, you must still record these transactions in your VAT records:

• Zero-rated exports go in Box 6 (total sales) but not Box 1 (output VAT)
• Services outside the scope of UK VAT should be recorded but excluded from your VAT return boxes (or included in Box 6 only, depending on the type of supply)

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