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Should EU subcontractors inc VAT in their invoice?

UK based SME wants to understand if the EU subcontractors invoicing it, should bill VAT too?

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Hello Accounting Web Community Experts,

And wishing everyone a Happy New Year.

We are a UK based SME working with several EU27 (Germany, Spain, Portugal, Italy, Denmark, Norway and Finland) subcontractors who had up until Dec 2020 not been charging us VAT for supplying us their software engineering skills.

  • Should they be adding VAT to their January 2021 invoices and going forward?
  • And if so, what are the options for us to be able to reclaim this back?
  • And if an EU27 nation applies a rate for example of 26.5% (Italy), are we limited to the UK 20% in our refund from HMRC?

Thank you
Software SME

Replies (2)

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By Les Howard
15th Jan 2021 19:13

B2B General Rule services are still charged without VAT. If you are the UK recipient you should use the Reverse Charge mechanism to account for the output tax and reclaim as input tax.

Thanks (1)
By Andre Zac
18th Jan 2021 11:33

Thank you @LesHoward

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