Providing digital services to an EC customer

If a UK VAT registered company sells digital services to an EC customer, VAT should be charged at that customer's local rate.

This is configured in the IRIS KashFlow sales code:

The sales code will be treated as if the supply was within the EC and therefore out of scope of UK VAT if:

• Digital Service has been checked on the sales code configuration.

• The customer is configured as VAT registered in the EC.

• The customer's address is in an EC country.

If all of the above are true, sales using this code will only appear in box 6 (total value of sales and all other outputs excluding any VAT) of the VAT report.

If you find or have been advised that the service you provide is treated as being supplied in the UK, it is subject to UK VAT and should be included in both box 1 (VAT due in the period on sales and other outputs) and box 6 (total value of sales and all other outputs excluding any VAT) of the VAT report. In this circumstance the Digital Service checkbox on the sales code should be cleared.

To avoid incorrect treatment on the VAT report, if you provide digital services to both EC and UK customers we recommend using two separate sales codes. For EC customers with Digital services checked, for UK customers with Digital services cleared.

For further information, see HMRC's Place of supply of services guidance here.