If you run a UK agency and your clients are based abroad, you have probably asked yourself: do I charge them VAT? The answer is not the same for every client. Get it wrong and you could undercharge a client, overpay HMRC, or trigger a VAT registration requirement in another country.
This is a practical guide on invoicing international clients from your UK agency: VAT rules for B2B services, B2C services, and the specific cases that trip up agency founders most often.
The rules here apply to VAT-registered UK agencies. If you are not VAT-registered yet (your turnover is below the £90,000 threshold), you do not charge VAT at all. But once you register, international invoices need careful handling.
The Basic Rule: Place of Supply
VAT is a tax on consumption. The general principle is that VAT should be charged in the country where the customer belongs. For services, this means the place of supply determines which country's VAT applies.
For UK agencies selling services to overseas clients, the place of supply depends on two things:
- Is your client a business (B2B) or a consumer (B2C)?
- Where is your client based?
Let us walk through each scenario.
B2B Services: The Reverse Charge
If your client is a business (VAT-registered in their own country), the place of supply is where the client belongs. That means the supply is outside the scope of UK VAT. You do not charge UK VAT on your invoice.
Instead, your client accounts for the VAT in their own country using a mechanism called the reverse charge. They self-assess the VAT on their local VAT return and, if they are fully taxable, reclaim it in the same return. No cash changes hands for the VAT element.
For your invoice, this means:
- No UK VAT added to the total
- A clear statement that the reverse charge applies
- Your client's VAT number (or equivalent) on the invoice
Here is an example. Your 12-person digital agency in Shoreditch invoices a US marketing firm $15,000 for a brand strategy project. The US firm is a business. You issue the invoice with no UK VAT. You note "Reverse charge: customer to account for VAT in the United States." The US firm handles the tax on their side.
You still record the sale in your UK VAT return. It goes in Box 6 (value of supplies) and Box 7 (value of exports). But not in Box 1 (output tax) or Box 3 (total output tax). Your accountant will show you exactly how to code this in Xero or QuickBooks.
What You Need from Your Client
To treat a supply as B2B, you need reasonable evidence that your client is a business. The safest approach is to obtain their VAT registration number or equivalent tax ID. For EU clients, you can validate their VAT number through the VIES system. For non-EU clients, a company registration number or tax ID is sufficient.
If you cannot confirm they are a business, treat the supply as B2C. That changes the VAT treatment entirely.
B2C Services: The General Rule
If your client is a consumer (not a business), the place of supply is where you, the supplier, belong. For a UK agency, that means the supply is subject to UK VAT. You charge 20% UK VAT on your invoice, regardless of where the client lives.
This catches many agency founders out. A web designer in Manchester Northern Quarter builds a site for a US-based individual. The client is not a business. The designer must charge 20% UK VAT on the invoice, even though the client is in America.
There are exceptions for certain services supplied to consumers outside the UK. But for the standard agency services we see, marketing, design, PR, development, consultancy, the general B2C rule applies. You charge UK VAT.
EU Clients: Post-Brexit Rules
Since 1 January 2021, the UK is treated as a third country by the EU. The rules are now the same as for any other non-EU country.
For B2B services to EU businesses: no UK VAT. Reverse charge applies. Your client accounts for VAT in their own EU member state.
For B2C services to EU consumers: you charge UK VAT at 20%. This is the same as the general B2C rule above.
There is no longer any requirement to register for VAT in an EU country purely because you sell services to consumers there (the old "distance selling" rules for services were abolished for UK suppliers post-Brexit). However, if you have a physical presence in an EU country, an office, a branch, or staff working there, you may need to register for VAT locally. That is a separate conversation with your accountant.
Non-EU Clients: The Simpler Side
For clients in the US, Canada, Australia, UAE, and other non-EU countries, the rules are straightforward.
B2B: No UK VAT. Reverse charge applies to the client.
B2C: UK VAT at 20% applies.
The only complication comes if you supply services that are physically performed in the client's country. For example, if your agency sends a team to Dubai to run a campaign on the ground, the place of supply may shift to the UAE. But for the vast majority of UK agencies delivering services remotely, the rules above hold.
Invoicing Format: What to Include
Your international invoices should include the same core information as a domestic invoice, plus a few extras:
- Your company name, address, and VAT number
- Your client's name, address, and VAT/tax ID (for B2B)
- A unique invoice number and date
- A description of the services
- The net amount (before VAT)
- For B2B: "Reverse charge, customer to account for VAT"
- For B2C with VAT: the VAT rate and amount
- The total amount due
If you use accounting software like Xero, FreeAgent, or QuickBooks, you can set up tax rates for "Zero-rated exports" or "Outside scope, reverse charge." Do not use the standard 20% rate for B2B international invoices. That would mean you charge VAT you should not, and your client cannot reclaim it from HMRC.