Last updated: 14 October 2026
How do you account for VAT on services bought from the EU or outside the EU?
For most business-to-business services bought from overseas suppliers, inside or outside the EU, the place of supply is the UK, where your business is. The supplier doesn’t charge UK VAT, so you use the reverse charge. You account for UK VAT on the value as output tax and reclaim it as input tax on the same VAT return. For a fully taxable business, the net effect is nil.
How the reverse charge works on your VAT return
| Box | Entry |
| Box 1 | Add VAT at the UK rate on the service value |
| Box 4 | Reclaim the same VAT, if you can recover it |
| Box 6 | Include the net value as a sale |
| Box 7 | Include the net value as a purchase |
Common reverse charge services
- Software and cloud subscriptions, such as SaaS
- Online advertising, such as Google or Meta ads from Ireland
- Consultancy, legal and accountancy services
- Freelancers and contractors overseas
Exceptions to the general rule
Some services are taxed where they are performed or used, for example:
- services related to land, which are taxed where the land is
- admission to events, which is taxed where the event takes place
- passenger transport, which is taxed where it takes place
- restaurant and catering services
Not VAT-registered?
Reverse charge services count towards your VAT threshold. If you buy a lot of services from abroad, for example advertising, they could push you over £90,000 even with low UK sales.
Example
A small UK agency, not VAT-registered, sells £70,000 of services and buys £25,000 of advertising from overseas suppliers. Its taxable turnover for the threshold test is £95,000, so it must register.
Partially exempt businesses
If you make exempt supplies, such as insurance, you may not be able to reclaim all of the reverse-charged VAT, so it becomes a real cost.
Example with a VAT return
A VAT-registered company pays £1,000 a month for US software. Each quarter it adds £600 to box 1 and £600 to box 4, and £3,000 to boxes 6 and 7.
Common mistakes with overseas services
Many businesses forget to account for the reverse charge on services bought from overseas suppliers, such as software or advertising. The reverse charge means you account for UK VAT on your return and, in most cases, reclaim it at the same time. If you’re not VAT-registered, these services count towards your VAT threshold.
A further example
A UK business buys £1,000 of US software. It reports £200 output VAT and £200 input VAT on the same return, so the net cost is nil if it’s fully taxable.
Frequently asked questions
Should an EU supplier charge me VAT?
Not if you give them your UK VAT number for B2B services.
Do I need a VAT invoice for reverse charge services?
Keep the supplier’s invoice. It won’t show UK VAT.
Are Google Ads subject to UK VAT?
Google UK charges VAT, but some accounts are invoiced from Ireland with the reverse charge. Check your invoices.
What about digital services sold to consumers?
Those are taxed where the consumer is.
Related: VAT on purchases from the USA and VAT on EU sales.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on overseas services. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
