Invoicing to EU businesses and VAT considerations after Brexit
Brexit has caused a lot of confusion for UK businesses and EU businesses that trade in the UK. The rules haven’t always been crystal clear, which has caused problems, including significant border delays.
We’re here to help clear up any doubts you may have about invoicing to EU businesses post-Brexit. This article covers which VAT schemes have been changed, how to invoice for goods crossing the border, and how freelancers offering services are affected.Start invoicing for free
If you're a VAT-registered business or were on a VAT scheme, you may have to make changes to how you sell and invoice to EU customers. We’ve outlined the VAT changes below.
The reverse charge procedure is used for intra-EU business-to-business (B2B) sales as a way of reporting VAT. The buyer accounted for the VAT on their VAT Return instead of the seller. This simplified the VAT process for cross-border sales and cancelled out the VAT due on the buyer’s accounts.
After Brexit, businesses based in Great Britain (England, Scotland, and Wales) can no longer apply the reverse charge to EU sales. However, businesses based in Northern Ireland can still apply the reverse charge as normal because they are still within the EU VAT area.
If your business is based in Great Britain and you sell goods to EU businesses, you will not apply VAT to your invoices. You will, however, need to apply for an EORI number to sell abroad, and should familiarise yourself with customs declaration requirements.
If your business is based in Northern Ireland, you can continue applying the reverse charge to EU transactions. If you’re selling to a business in Great Britain, the standard domestic VAT procedure will apply.
As with most tax-related schemes, there are some exceptions. The most notable exception is the supply of services to EU countries (read more below). You should speak to a qualified accountant or seek guidance from HMRC if you think your business should continue applying the reverse charge.
Post-Brexit, goods entering Great Britain (England, Scotland, and Wales) are considered “imports” rather than “acquisitions”. This means that the goods are subject to import VAT and duties.
If your VAT-registered business imports goods from EU countries, you should familiarise yourself with the C79 certificate which will prove the amount of import VAT you paid in a specific time period. This can then be used to declare the VAT on your VAT Return.
If your business is not registered for VAT in the UK, you'll still need to pay import VAT. However, you won't be able to reclaim it.
The VAT Mini One Stop Shop (MOSS) is a scheme in which businesses registered for VAT MOSS in an EU country can provide business-to-consumer (B2C) digital services to other EU countries without having to register in each country they sell to.
Due to Brexit, this scheme is no longer available in the UK. If your business sells eligible digital services in the EU, you'll need to register for VAT MOSS in another EU country or register for and collect VAT in each country you trade in.
Luckily, freelance business-to-business (B2B) services have not changed much after Brexit. If you supply services to businesses in the EU, it's treated the same as if you were supplying services to foreign countries, such as the US.
The “general” place of supply rules remain. For B2B sales, the place of supply is where the customer is based. For B2C (consumer) sales, the place of supply is where the supplier is based.
For example, if you're an England-based freelance copywriter who provides services to a German company, the place of supply is Germany. You should include the German company’s VAT Registration Number (or foreign equivalent) on your invoice and shouldn't apply VAT. The German business will still account for the VAT on their VAT Return (or foreign equivalent) under the reverse charge.
This means that freelancers are not required to register in each EU country they operate in. There are also several exceptions to the “general” place of supply rules, so it’s always best to speak to an accountant if you’re in doubt.
Below, you’ll find a sample invoice for a UK business selling goods to an EU business after Brexit. Since the reverse charge no longer applies, the invoice should not include VAT and should be treated as a foreign transaction.
This next invoice is an example of a UK freelancer selling services to an EU business after Brexit. The “general” place of supply rules and the reverse charge apply to this transaction.
If you’re a small business or freelancer, this information might seem complex. But there are ways that you can make sure that your invoices are compliant and created with ease.
Invoicing software, like SumUp Invoices, can help you create and issue an invoice in under 1 minute. If your customer is abroad, you can enable or disable the reverse charge in one click. You can also change the language of an invoice to show your customers that you’re willing to go the extra mile.
In addition, you can easily add an online payment link directly to your invoice so your customer can pay instantly online.Start invoicing for free