Reverse charging services received from a French supplier


What is reverse charging?

Reverse charging is the technical name for what is intended to be a VAT simplification measure. When a business makes a supply of certain services overseas, instead of having to register for VAT in the unfamiliar overseas country and then charge and account for it, the local customer (if VAT-registered) accounts for the VAT. Where a business sells its services across the whole of Europe, this can avoid it having to separately register for VAT in up to 26 other countries.

Reverse charging does not change the place of supply. A sale deemed to be in the UK will still be in the UK and subject to UK VAT. The reverse charge only determines who has the responsibility of accounting for local VAT in that country - the supplier or the customer.

Reverse charging does not apply to services provided between different offices of the same legal entity, for example where a French company provides a service to its UK branch.

Reverse charging in the UK - general procedure

A UK business which is VAT-registered has to account for the reverse charge when it receives any of the 3 classes of services set out in more detail below, for business purposes, from a supplier who belongs in France.

To apply the reverse charge, VAT at the usual UK rate (it may be at the standard rate, zero-rated or exempt) is calculated based on the value of the service received, and then entered as a liability on the UK VAT return by adding it to box 1. It may then reclaim that same amount by including it as input VAT in box 4 of the same VAT return, subject to the normal rules about recovering input VAT.

Where the full amount of VAT can be reclaimed, there is no net cost to the UK business. Where the input VAT that can be reclaimed is restricted, for example due to partial exemption rules, the effect of the reverse charge is to put the UK business in the same position as if it had received the service from another UK business instead of from France.

If the business accounts for VAT on the Flat Rate Scheme, it does not need to pay Flat Rate VAT on the value of the supply, or include it on its VAT return.

Reverse charging in the UK - Schedule 5 services

These are mainly intangible or intellectual services received from a French business, covered by Schedule 5 of the Value Added Tax Act 1994 (as amended).

If the UK business does not receive the service for a business purpose, reverse charging will not apply, and the French supplier is likely to charge TVA.

If the UK business is not registered for VAT, there is no reverse charge to apply. French TVA may be charged, and additionally the value of the service will be included in the turnover of the UK business in determining whether it needs to register for UK VAT.

If, exceptionally, one of the following services is supplied from a French business to a UK business, but the service is effectively used and enjoyed outside the EC (for example, in Jersey), the reverse charge does not need to be applied in the UK. The services are:

  • supplies of the letting on hire of goods (other than means of transport);
  • telecommunications services;
  • radio and television broadcasting services; or
  • electronically supplied services.

Reverse charging in the UK - EC simplifications

These are services received from a French business, such as:

  • Services performed in France on UK goods temporarily sent there
  • Some freight transport services
  • Most intermediary services supplied by a French agent

If the UK business does not receive the service for a business purpose, it should not supply its UK VAT number. Reverse charging will not apply, but the French supplier is likely to charge TVA.

If the UK business is not registered for VAT, reverse charging will not apply, but the French supplier is likely to charge TVA. The value of the service does not need to be included in the turnover of the UK business in determining whether it needs to register for UK VAT.

Reverse charging in the UK - other services

These are services received from a French business such as:

  • Most services relating to land in the UK
  • Most services related to a live event or physical activity in the UK
  • Passenger transport in the UK
  • Some freight transport services

If the UK business does not receive the service for a business purpose, it should not supply its UK VAT number. Reverse charging will not apply, but the French supplier may have to charge UK VAT.

If the UK business is not registered for VAT, reverse charging will not apply, but the French supplier may have to charge UK VAT. The value of the service does not need to be included in the turnover of the UK business in determining whether it needs to register for UK VAT.