VAT implications of cross-border trade of services

The Northern Ireland Protocol states that UK VAT rules related to transactions in services will apply across the whole of the UK, to include Northern Ireland. In this article we summarise the VAT implications of cross-border trade of services.

Introduction
Trade between Ireland and Northern Ireland
Trade between Northern Ireland and GB
Trade between Ireland and GB
Trade between Ireland / Northern Ireland and rest of the world (non-EU)
Further information

Introduction

It is essential that traders understand and apply the relevant VAT rules correctly. There are a number of VAT considerations which businesses that are centred around the provision of services need to take into account. Northern Ireland remains aligned to many EU VAT rules on goods. Northern Ireland is not aligned to EU VAT rules on services.

Trade between Ireland and Northern Ireland

Business to Business: Place of supply is where the customer belongs.

Where services are received by NI traders from EU businesses, the NI business should self-account for VAT.

Where services are provided to EU VAT registered businesses by NI traders, the EU business should self-account for VAT.

B2B supplies of services to EU residents are taxed under the reverse charge, meaning that the customer accounts for VAT in the country in which it is established. That means that a UK business receiving a supply from a European business account for UK VAT on that supply. Conversely a UK service provided to a French business is outside the scope of UK VAT, but the French company accounts for French VAT on the service.

Note, the rules outlined above apply to general rule services. Special VAT rules apply to a variety of different services. We have listed below a number of the most common services that attract "special" VAT treatment:

Services relating to a specific piece of land / a specific building
B2C passenger transport services
The letting on hire of goods (including means of transport)
Restaurant and catering services
Radio, television & telecommunications services
Electronically supplied services (digital services)
Admission to events (e.g., cultural, educational and entertainment activities)
Freight transport
Services supplied where performed (e.g., repair work carried out on goods)
Intermediary/ agency services
Financial services
B2C services of a professional / technical / financial / intellectual nature (e.g., consultancy / legal / engineering / accountancy services).

Business to Consumer: Place of supply is where the supplier belongs.

General rule services supplied to NI private customers by suppliers based in Ireland should continue to be subject to Irish VAT.

The general rule services supplied to EU private customers by UK suppliers should continue to be subject to UK VAT.

As noted in the B2B information above, specific services often attract specific VAT rules. From a B2C perspective, the following key rules are particularly important:

B2C services of a professional, technical, financial, intellectual, or other intangible nature supplied by a UK/EU business to non-business customers outside of the jurisdiction in which the supplier is established (i.e., outside the UK/EU). This includes the services of advertisers / consultants / engineers / lawyers / accountants / financial services / supply of staff amongst other supplies. These services are deemed to be supplied where the customer belongs. As such, where such services are supplied by a UK supplier to a non-business customer based in the EU, the services are outside the scope of UK VAT. Similarly, B2C services of this nature provided from suppliers based in Ireland - NI/GB based B2C customers will be outside the scope of Irish VAT. This is different to the position pre-Brexit. The Irish supplier will have a responsibility to register for UK VAT and account for the VAT as a zero threshold applies for non-established traders. The reverse situation (GB/NI supplier to B2C ROI B2C customer) applies to certain types of services. Further specialised is required here.
B2C supplies of digital services - where suppliers provide electronically supplied services, the place of supply (i.e., the place where a VAT liability is likely to arise) will be the place where the customer is located.

Summary of the place of supply of services rules in Ireland

Country of establishment of supplier	Country in which customer established	Status of customer	Place of supply	Person liable to account for Irish VAT
Ireland	Ireland	Business or Private	Ireland	Supplier
Ireland	Other EU State	Business	Other EU State	No Irish VAT
Ireland	Other EU State	Private	Ireland	Supplier
Ireland	Outside EU	Business	Outside EU	No Irish VAT
Ireland	Outside EU	Private	Depends on nature of the Service	Supplier (if VAT occurs)
Other EU State	Ireland	Business	Ireland	Business customer
Other EU State	Ireland	Private	Other EU State	No Irish VAT
Outside EU	Ireland	Business	Ireland	Business customer
Outside EU	Ireland	Private	Depends on nature of the Service	Depends on nature of the service - if taxable in the State - the supplier

Trade between Northern Ireland and GB

Business to Business

Services treated as a domestic supply of services. UK VAT applied.

Business to Consumer

Services treated as a domestic supply of services. UK VAT applied.

Trade between Ireland and GB

Business to Business: Place of supply is where the customer belongs.

Where services are provided to an EU business from GB, the EU business should self-account for VAT. Similarly, where services are provided to a GB business from the EU, the GB business should self-account for VAT. It is essential to consider the rules of individual EU member states.

Again, we would stress that these rules apply to general rule services. As outlined above, specific services often attract specific VAT rules.

Business to Consumer: Place of supply is where the supplier belongs.

As a general rule, services provided to private customers will continue to be subject to VAT in the place where the supplier belongs, i.e., suppliers based in Ireland will apply Irish VAT to private consumers based in GB and GB suppliers will apply UK VAT to private consumers based in Ireland.

There are a number of exceptions, for example, the rules around the supply of professional / technical / financial services and the supply of digital services, as detailed further above.

Trade between Ireland / Northern Ireland and Rest of World (Non-EU)

Business to Business: Place of supply is where the customer belongs.

The service will fall outside the scope of UK / Ireland VAT. The NI / Irish business needs to consider the local VAT rules in the jurisdiction where the supply is being made.

Business to Consumer: Place of supply is where the supplier belongs.

VAT treatment will depend on the nature of the services being provided. There are a number of general rule services which, when supplied to private consumers in Rest of World, will be deemed to be outside the scope of UK / Ireland VAT. If this is the case local VAT rules need to be considered. This could require VAT registration in the country in which the services are supplied.

Note: Professional VAT advice should be sought if traders are unsure as to the appropriate VAT treatment of the supply of specific services.