VAT on Purchase of Digital Services

UK VAT registered business buys digital service from Germany. Do we have to be charged UK Vat?

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Does a UK VAT registered business have to be charged 20% VAT by German supplier of digital services?

The invoice we received for the purchase of digital services by the German supplier had VAT on. Is that correct?

If so, can we claim it back?

Can someone please enlighten me on the purchase of digital services VAT rules.

My personal understanding is that as a business (B2B) we do not have to be charged UK VAT. 

If it were B2C then the UK individual would be charged UK VAT.

 

Thank you 

B

Replies (9)

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By paul.benny
06th Jan 2022 17:44

Search for the Brace for Brexit articles on here. They should provide answers to most of your questions.

Regarding your charge - are you sure it's UK VAT? Does the invoice show a UK VAT number? If so, then I vote yes to recovery just like any other input tax.

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Replying to paul.benny:
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By benjie
06th Jan 2022 17:57

Thanks Paul.
The invoice does not state UK VAT explicitly.
Standard German VAT is 19% so the 20% VAT I guess can only be UK VAT. I think the supplier treated it as B2C hence the VAT charge.

The supplier is German (VAT registered there) and does not have UK VAT number.

Thanks

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Replying to benjie:
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By Outofpractice
06th Jan 2022 18:31

It's my understanding that you are correct as a business you should not have been charged UK VAT if the service you've been supplied is deemed a digital service & you've provided your UK VAT registration number.

But to my knowledge the supplier should be UK VAT registered and have a UK VAT number.

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...

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Replying to Outofpractice:
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By benjie
06th Jan 2022 21:14

Thank you

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Replying to benjie:
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By paul.benny
06th Jan 2022 20:29

They may be using the German equivalent of MOSS (if that exists). If you haven't provided your UK VAT number, they've probably treated you as B2C. I'd treat it as recoverable VAT and make sure that any similar future suppliers have your vat number.

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Replying to paul.benny:
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By benjie
06th Jan 2022 21:15

I agree. Thanks!

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Replying to paul.benny:
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By paul.benny
07th Jan 2022 06:07

I should caveat that remark by saying that you can only recover input tax if you have a VAT invoice and from what you've said, it doesn't strictly qualify.

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VAT
By Jason Croke
07th Jan 2022 08:35

I would also qualify that you can only reclaim VAT where it has been charged correctly, where VAT has been charged in error then HMRC can deny you the right of reclaim.

The German supplier has charged VAT incorrectly, maybe because they think you are B2C or maybe they are just confused, but either way, a B2B supply of services from a Non-UK supplier should be outside the scope of VAT, HMRC could argue that you cannot reclaim the VAT on this invoice because it shouldn't have been charged in the first place.....in reality HMRC are unlikely to hound you for a small amount of VAT, but the technical point still stands. If the VAT is significant in value or you expect further invoices from the supplier (ie, subscription), then have a word with the supplier to get it right going forwards.

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Replying to Jason Croke:
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By benjie
07th Jan 2022 09:37

Thanks Paul and Jason.

I do not intend on claiming the VAT and have reached out to the supplier to ensure it doesn't occur again.

I am very grateful for your assistance.

Thanks

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