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HMRC internal manual

VAT Place of Supply of Services

Reverse charge: introduction

The reverse charge provisions are a simplification measure to avoid the need for suppliers to register in a Member State where they supply their services. Normally, it is the supplier of a service who must account to the tax authorities for any VAT due on their supplies. However, for certain services, where the recipient belongs in an EC Member State and the supplier belongs in another country, the position is reversed and it is the customer who must account for any VAT due. This procedure is referred to in this manual as ‘reverse charge’ but it is also referred to by some people as ‘tax shift’.

Accounting for VAT using the reverse charge procedure is not a complicated procedure in accounting terms. Instead of being charged VAT by the supplier, a UK business customer who receives any of the relevant services credits his VAT account with the necessary amount of output tax as if he had supplied the services himself and at the same time debits his account with the amount of input tax to which he is entitled under the normal rules. The practical effect of this is that there will be no net tax payable on the transaction except by businesses which are not entitled to full deduction of input tax, such as those which are partly exempt.