Key takeaway
A foreign billing address does not settle the place of supply, and VAT collected is not additional seller earnings.
Classify the actual service before the invoice
A proposed agreement may combine a data-use grant, continuing API access, preparation and advisory work. Give the accountant the actual terms and operations before assuming that one label, data license, determines the VAT treatment. Identify the supplier, customer business status and establishment concerned with the service.
HMRC Notice 741A describes the B2B general rule as supply where the customer belongs, subject to the applicable rules and exceptions. It distinguishes supplies outside UK scope from zero-rated supplies. Sections 3 and 4 address establishments and the one most closely concerned; a billing address or a server location alone does not settle the answer. These are review questions for the actual transaction.
Complete the customer evidence note
This hypothetical UK supplier is considering two contracts with the same fictional group. One service is bought by its UK business; another is requested for an overseas operating establishment. The example does not decide which establishment qualifies or whether either transaction follows the general rule. It records the evidence and unresolved point before someone issues an invoice.
The notice’s B2B evidence guidance supports checking business status using appropriate tax-registration or other commercial evidence. Keep the actual entity separate from its group brand. Ask who contracted, who receives the service, where the relevant resources are and which establishment is most closely concerned. Preserve the adviser’s conclusion and assumptions beside the agreement version.
| Hypothetical fact | Evidence available | Unresolved point |
|---|---|---|
| Contract with UK company | Legal name and signed agreement | Actual service classification and applicable rate |
| Overseas branch requests access | Branch request and operating description | Which establishment is most closely concerned? |
| Invoice goes to group accounts office | Payment instructions only | Billing destination is not enough |
| Customer claims business status | Registration/commercial evidence requested | Verify sufficient evidence for the actual supply |
Separate tax collection from cash contribution
The following hypothetical one-license model uses USD for planning only. Assume the accountant has classified Case A as a UK standard-rated supply with a $10,000 net fee, 20% VAT and no other transaction tax in the illustration. HMRC’s rates page supplies the 20% standard rate; the supply classification is an explicit invented assumption. Actual UK invoicing, VAT accounting and sterling conversion require the accountant’s instructions.
Assume $2,500 of incremental contractor preparation cash is paid before the decision, no recurring work and no external seller referral charge. The illustration reserves the full output VAT and excludes input-tax recovery, other taxes, finance costs and overhead. Case B assumes a confirmed outside-UK-scope result under the applicable rule; it does not assume that the overseas jurisdiction has no tax.
| Illustrative planning case | Cash received / tax reserve | Contribution after $2,500 cost |
|---|---|---|
| A: net $10,000, assumed 20% VAT | $12,000 received; $2,000 VAT reserved | $7,500 before excluded costs/taxes |
| B: $10,000, assumed outside UK scope | $10,000 received; $0 UK VAT in this scenario | $7,500 before any foreign tax and exclusions |
| No paid contract after preparation | $0 received | −$2,500 |
Keep the quoted price convention visible
In Case A, a quote of $10,000 plus VAT differs from a $10,000 VAT-inclusive amount. Under the same fictional 20% assumption, the inclusive amount contains $8,333.33 net and $1,666.67 VAT, rounding to cents. After the stipulated $2,500 cost, the comparison contribution is $5,833.33. Confusing the two conventions changes the modeled seller amount by $1,666.67.
Write the fee, tax treatment and currency convention explicitly in the reviewed offer. Do not promise a fixed net amount before the accountant has resolved location, classification and invoicing. If the location conclusion changes, rerun the comparison rather than quietly treating the VAT line as a seller discount or extra profit.
Hold the missing location decision, not just a form field
For the invented overseas branch, the company has a delivery request but incomplete establishment evidence. The appropriate output is a hold on the invoice treatment and a targeted question for the accountant. A completed address field in a tool is insufficient. The commercial team can still compare rights and preparation obligations while the tax fact is being resolved.
If a receiving party proposes reverse-charge wording, verify it for the actual supplier/customer route and jurisdiction. Do not treat a sentence copied from another contract as evidence. Notice 741A describes several rules; selecting the correct one requires the actual service and parties. Record any foreign tax question separately so outside UK scope never becomes shorthand for tax-free everywhere.
Use a dated invoice decision record
The useful artifact names the contracted entity, actual service, relevant establishment, business evidence, adviser conclusion, price convention and review date. It lets finance explain why tax was or was not charged and which fact would require reconsideration. Keep tax collected distinct from seller proceeds in any earnings discussion.
Offer comparison can retain the quote convention; Earnings models simple receipts and costs but does not classify VAT or calculate a VAT return. VOID has no upfront seller referral fee under its referral model. Possible receiving-program-paid compensation is separate from the modeled seller receipt; it does not decide the VAT treatment. Any actual sample or license still requires its own approval.