Providing services abroad: who owes VAT?

In an increasingly global world it is very common for businesses to make supplies of services to customers outside the UK as well as buy in services from overseas suppliers.

Let’s take a common example to start a UK business providing marketing services to a Spanish business (see Example 1).

These services will be subject to VAT (we have assumed here that both companies are VAT registered) – but where? Is it UK VAT that is due or Spanish VAT? Which company must account for the VAT? These are the types of questions that businesses which operate internationally must consider for every service received from or supplied to outside the UK.

Fortunately there are rules in place which set out how VAT accounting works in these types of scenarios. While this article cannot cover every...