VAT on digital services to overseas consumers

When a UK business sells digital services (broadcasting, telecoms or electronically supplied services) to a private consumer, the supply is taxed where the consumer belongs, under paragraph 15 of Schedule 4A to the VAT Act 1994. Sales to consumers outside the UK are outside the scope of UK VAT but may be taxable in the consumer’s country. For EU consumers, HMRC’s guidance says you either register for VAT in each EU country where VAT is due or register in one EU member state for the One Stop Shop non union scheme.

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What counts as a digital service?

HMRC’s guidance on digital services to consumers covers three categories: radio and television broadcasting, telecommunications, and electronically supplied services. The third is the one most UK businesses meet. It covers services delivered automatically over the internet or an electronic network with minimal or no human intervention, such as e books and downloadable PDFs, music, films and games, software and updates, web hosting, online magazines and advertising space on a website. The legal definitions sit in paragraphs 9(3) and 9(4) and 9E(2) of Schedule 4A.

Human involvement is the dividing line. HMRC’s examples include:

Service	Digital service?
PDF automatically emailed or downloaded after purchase	Yes
PDF manually emailed by the seller	No
Online course of pre recorded videos and downloads	Yes
The same course plus support from a live tutor	No
Live webinar	No
Individually commissioned content sent digitally, such as a report	No

Services that only use the internet to communicate are not digital services, including advice from lawyers and financial consultants by email, online ticket or hotel booking, and the sale of physical goods ordered online.

Where is a digital service to a consumer taxed?

For most business to consumer services, the general rule in Notice 700, paragraph 4.8.3, is that the supply is made where the supplier belongs, so a UK consultant charges UK VAT to a private client in France. Digital services are an exception. Schedule 4A, paragraph 15, treats a supply to a person who is not a relevant business person as made in the country where the recipient belongs. HMRC’s guidance draws the consequences:

digital services to UK consumers are liable to UK VAT
digital services to consumers outside the UK are not liable to UK VAT but may be liable to VAT in the consumer’s country
a UK business supplying outside the UK must check the rules in the customer’s country, as it may need to register there

The education table in the same guidance shows why classification counts: distance learning through webinars or remote tutors is taxed where the supplier is established, while automated learning is taxed at the consumer’s address or residence.

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How do I know whether the customer is a business or a consumer?

HMRC’s guidance says that if a customer does not give a VAT registration number, you should treat the sale as business to consumer and charge the VAT due in the customer’s country. You may accept other evidence that a customer is in business, such as a business website, but it is your decision, and a customer cannot insist on business treatment without a valid number. HMRC manual VATPOSS05620 adds that a VAT number quoted for what is clearly a consumer purchase should be challenged.

A business customer changes everything. The supply then falls under the business to business general rule and the customer accounts for any VAT in its own country, just as a UK business does under the reverse charge on services from abroad.

How do I prove where the consumer belongs?

The place of supply is where the consumer usually lives, so a UK expat living in Spain is a Spanish customer. HMRC’s guidance lists presumptions that remove the need for further evidence, for example services through a wifi hotspot or internet cafe (taxed where that place is), through a mobile phone (the country code of the SIM card), or through a fixed landline. Otherwise you must obtain and keep evidence such as:

the billing address
the IP address of the device used
bank details
the SIM card country code
other commercially relevant information

The guidance says a business must get and keep 2 pieces of information as evidence of where the consumer normally lives. For small businesses using a payment service provider, it suggests asking for the billing country or telephone dialling code at checkout and matching it to the country code in the payment provider’s notification. If they do not match, contact the customer to resolve the discrepancy.

How do UK businesses account for VAT on EU sales?

Notice 700, paragraph 4.8.4, says VAT on digital services to EU consumers is chargeable in the member state where the consumer belongs, and that you can either:

register for VAT in every EU member state where VAT is due and file returns and pay in each one, or
register for the One Stop Shop non union scheme in an EU member state, noting that the UK is no longer an EU member state

The UK’s own Mini One Stop Shop closed for sales made after 31 December 2020 (Notice 741A, paragraph 16.3), so a UK business can no longer register with HMRC to report EU digital sales. Registration for the non union scheme is made with the tax authority of the chosen EU country, which applies its own procedures. The One Stop Shop Union scheme that HMRC does run is for distance sales of goods from Northern Ireland, and HMRC’s guidance on that return says you must not report digital services to EU consumers on it.

Sales to consumers in other countries, such as Norway, Switzerland or Australia, are not covered by either scheme. HMRC’s guidance simply tells UK businesses to check the rules in the customer’s country.

What if I sell through an app store or marketplace?

HMRC’s guidance says that where digital services are sold to consumers through a third party platform, the platform is responsible for accounting for VAT instead of you, unless it meets all of a set of conditions: the contracts and invoices identify you as the supplier, and the platform does not authorise the charge, authorise delivery or set the general terms and conditions. HMRC expects most platforms to be liable. Payment processors alone are not platforms. Whether you are selling to the consumer or to the platform affects your pricing and your returns, see agent or principal for VAT.

What goes on the UK VAT return?

Digital sales to overseas consumers carry no UK output tax, but their value still goes in box 6, which includes supplies outside the scope of UK VAT under Notice 741A (Notice 700/12, paragraph 3.7). Section 26(2)(b) of the VAT Act 1994 allows input tax on costs attributable to supplies outside the UK that would be taxable if made in the UK, so UK VAT on hosting, software and marketing used to make those sales is normally recoverable in full.

Illustration only. A UK registered developer sells a £10 app subscription direct from its website. In one quarter it makes £30,000 of sales to UK consumers, £15,000 to EU consumers and £5,000 to consumers in Canada. It charges UK VAT on the UK sales only. It accounts for each EU country’s VAT on the £15,000 through the non union scheme registration it holds in an EU member state, and checks Canadian requirements separately. All £50,000 goes in box 6, and input tax on its UK costs is recoverable in full. If it had sold through an app store that met HMRC’s platform test, the store would handle consumer VAT and the developer would instead be supplying the store.

What mistakes come up?

Charging UK VAT on downloads sold to overseas consumers.
Treating live tutoring or bespoke reports as digital services, or automated courses as if they were not.
Accepting a claimed business status with no VAT number or evidence.
Keeping only one piece of location evidence.
Assuming the UK VAT registration threshold protects small sellers abroad. It decides UK registration only; the EU rules are separate.
Reporting EU digital sales on a Northern Ireland One Stop Shop goods return.

Overseas sales of physical goods follow different rules again, see selling goods to EU customers. The use and enjoyment override for electronically supplied services applies only to business customers (Notice 741A paragraph 13.1 and VATPOSS15500), so it does not change the consumer rules above.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.