VAT on services provided outside of the UK is a complex area, and has changed from January 2021 with Brexit.
In some cases there can be EU VAT liabilities where Digital Services are sold into the EU.
The pre 1 January 2021 arrangements, specifically MOSS (Mini One Stop Shop) operated by the UK, and the EU (€10,000 / £8,818 threshold) for Digital Sales into the EU no longer apply.
This briefing covers the VAT status of Services post 1 January 2021 – it does not cover Goods for which there are separate rules.
To understand the VAT liability of different services, its necessary to understand some basic classification points:
How UK VAT Law and EU VAT Law Interacts
Post Brexit, the UK and EU have separate VAT systems.
Confusingly both are called “VAT” and based on the same principles and rules. Over time doubtless there will be divergence.
Generally UK businesses only have UK VAT obligations, other than the sale of certain Digital Services into the EU, where an EU liability arises as well.
B2B or B2C
To correctly identify the VAT treatment of services, you need to know whether its supplied to a Business or Private Individual.
If supplied to a Business, it will be B2B transaction (Business to Business)
If supplied to a Private Individual, it will be a B2C transaction (Business to Consumer). This includes supplying services to a business for non business (private) use.
Generally you treat customers as being Consumers, i.e. B2C, unless they supply a EU VAT number or other evidence of being in business.
Classification of Services
The UK and the EU have Common “Place of Supply” rules. Under these:
- The default position for B2C services is that services are supplied where the supplier belongs, irrespective of the location of the customer. This means that a UK business is deemed to be supplying services in the UK, even if their customer is outside of the UK.
- The default position for B2B services is that services are supplied where the customer belongs, irrespective of the location of the supplier. This means that a UK business is deemed to be supplying services in the EU if their customer is based there.
- There are various exceptions to this default rule. They are covered in Place of supply of services (VAT Notice 741A)
- The exceptions include Digital Services
Digital Services and Electronically Supplied Services
Within the VAT rules of both UK and EU there is a precise definition given to Digital Services.
You will need to look at HMRC guidance for the details, but broadly a Digital Service is one provided with minimal or no human intervention, and with a high degree of automation.
HMRC give the following examples of what may and may not be Digital Services:
| Digital Service | Not a Digital Service |
| PDF document automatically emailed by seller’s system
PDF document automatically downloaded from site Stock photographs available for automatic download Online course consisting of pre-recorded videos and downloadable PDFs Link to online content or download sent by manual email |
PDF document manually emailed by seller
Live webinar Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor or webinar, forum etc. Individually commissioned content sent in digital form, for example, photographs, reports, medical results |
HMRC Guidance
- VAT rules for supplies of digital services to consumers
- Place of supply of services (VAT Notice 741A)
Digital Services are deemed supplied where the Customer is located, and in the case of EU customers:
- If it is a B2B Supply, the Customer is liable to pay VAT via Reverse Charge in their country. The UK business has no EU vat obligations, and the supply is outside of UK VAT.
- If it is a B2C Supply, the Business has to pay EU VAT – see below. There is no threshold for this, and the liability is incurred after the first supply regardless of value.
EU VAT on a B2C Digital Transaction can be paid in one of two ways:
- VAT register in each EU country
- VAT register in a EU country of your choice (probably Ireland or Malta, as they speak English) and use Non Union MOSS (Mini One Stop Shop) – clearly this is easier than registering in each country.
- Note there is no threshold for this, and the liability is incurred after the first supply regardless of value
How These Rules Affect Typical Yoga Teachers Supplies
It is important to note these rules affect supplies by a UK business to EU Businesses and Consumers only. For anything supplied by a UK business to a UK business or consumer, the normal £85,000 VAT threshold applies.
| Type of Service | B2B – EU Business Customer | B2C – EU Private Customer |
| Live Streamed Class, eg Zoom | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
No EU vat obligations. Treated as supplied in UK, and normal £85k threshold applies. |
| Recorded Class, eg YouTube | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
VAT due in EU, no threshold. No UK vat obligations. |
| Teacher Training provided Online with live content (can be part pre-recorded) | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
No EU vat obligations. Treated as supplied in UK, and normal £85k threshold applies. |
| Teacher Training provided Online with pre recorded content | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
VAT due in EU, no threshold. No UK vat obligations. |
| Teacher Training provided in UK with EU resident visiting UK | UK VAT applies with normal £85k threshold. No EU obligations. | UK VAT applies with normal £85k threshold. No EU obligations. |
| Yoga Course without live content, eg pre recorded | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
VAT due in EU, no threshold. No UK vat obligations. |
| Yoga Course with live content (can be part pre recorded) | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
No EU vat obligations. Treated as supplied in UK, and normal £85k threshold applies. |
| E-Book downloaded automatically from website or email link | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
VAT due in EU, no threshold. No UK vat obligations. |
| E=Book sold manually | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
No EU vat obligations. Treated as supplied in UK, and normal £85k threshold applies. |
| Physical Book sent by post | This is a supply of goods, not services. Normally UK VAT exempt, but check rules in recipients country. | |
| Consultancy and Mentoring provided to a Yoga Teacher in person or over phone/video conference. | No UK or EU vat obligations by UK business. Customer pays VAT by reverse charge in their own country. |
No EU vat obligations. Treated as supplied in UK, and normal £85k threshold applies. |
Outside of Europe
UK law sees Europe and the rest of the world as synonymous as regards VAT.
Guidance on this page applies worldwide as regards UK VAT, but non EU other countries may have specific sales tax rules so the EU element of this content isn’t relevant in rest of world.
