Do You Charge VAT on Consultancy Services UK? 

Picture of Written by: Liez Comendador
Written by: Liez Comendador
VAT on Consultancy Services

Highlight the text in the article to activate the speech reader function.

Contents

Whether to charge VAT on consultancy services or not will be answered in this article. Read on for a brief guide to this indirect tax, including what it is generally charged to, if consultancy and professional services are charged with UK VAT, and other relevant questions.  

A Brief Introduction to UK VAT 

Value Added Tax (VAT) was introduced in 1973. It is a consumption tax on most goods and services sold by VAT-registered businesses in the UK, added at every point of the supply chain.  

Businesses must register for VAT if their taxable turnover exceeds £90,000 in a 12-month period or if they anticipate making such profits over the next thirty days. Registration is voluntary for businesses below this threshold. The de-registration threshold, on the other hand, is currently £88,000. 

VAT normally applies to the following ‘taxable supplies’: 

  • Goods and services 
  • Hiring or loaning goods 
  • Disposing of business assets 
  • Items sold to staff (e.g., canteen meals) 
  • Commissions (e.g., sales, brokerage, etc.) 
  • Business goods used for personal reasons 
  • Non-sales transactions (e.g., bartering, part-exchange, gifts, etc.) 

Take note that VAT rules for property transactions vary widely. They may be VAT-exempt or zero, reduced, or standard-rated depending on the circumstances. Certain goods and services, such as stamps, insurance, and education, are exempt from VAT.  

Read our guide on VAT Notice 708: Key to Reduced to Zero VAT Rate Liability. 

A Brief Introduction to UK VAT 

What Are Consultancy and Professional Services?  

Consultancy refers to the application of existing knowledge to provide substantial guidance to a customer. The consulting sector consists of six major areas, which hundreds of other fields originate. They include:

  • Financial advisory and technology consulting 
  • Strategy consulting 
  • Management consulting 
  • Operations consulting 
  • HR consulting 

Most of the above are considered taxable services, except for financial services, in which certain supplies are considered VAT-exempt. Read on whether they are charged VAT or not.  

Do You Charge VAT on Consultancy Services UK? 

Generally, VAT is taxed on consultancy and professional services and depends on whether the customer is UK-based or not. If a UK customer, VAT is charged at the standard rate, whilst no UK VAT is charged for non-UK customers, regardless of whether the customer is in business or not, especially post-Brexit. Certain financial services, such as those related to insurance or credit, are VAT-exempt. 

The ‘place of supply’ will determine where VAT is payable for a transaction. The rule of thumb is that VAT is due where the supplier is based for private consumers. Whilst for business customers, VAT is due where the customer is based. 

Do You Charge VAT on Consultancy Services UK? 

Other Frequently Asked Questions

VAT rates remain at a standard 20% for most goods and services. The reduced rate is at 5%, and 0% applies to zero-rate goods. 

Yes. Like other sectors and circumstances, businesses can reclaim VAT on consultancy fees if they were used exclusively for business purposes. Read our guide on how to reclaim VAT [overpayment, bad debt, & new build] for more information. 

A rule of thumb is that VAT will be due on services provided to UK businesses or between UK businesses, unless there is an exception. 

Services related to insurance, finance and credit, education and training, charities’ fundraising events, and others are not charged VAT. 

Some types of products and businesses are VAT-exempt, especially charities. Businesses that sell VAT-exempt services and goods or do not participate in taxable activities are free from VAT. 

Why Legend Financial for Your VAT Returns 

Generally, there is VAT on consultancy services. However, if you are a VAT-registered business, you can reclaim the VAT you paid on consultancy fees. As a VAT-registered company, you will have several responsibilities to seriously comply with. HMRC treats VAT non-compliance very strenuously, with the anti-VAT fraud and evasion regulations in place.  

You will need to regularly submit VAT returns, keep accurate VAT records, charge VAT on all taxable sales, and pay HMRC the right amount. Legend Financial’s VAT specialists are here to help ensure you are properly compliant with all your VAT obligations. Talk to our expert today! 

Author

  • Junaid Usman

    Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

    View all posts

Reviewed by:

Picture of Junaid Usman
Junaid Usman
Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

Leave a Comment

Your email address will not be published. Required fields are marked *

Similar Articles

Our Experts

Picture of Fahad Lateef
Fahad Lateef

Fahad is a Chartered Certified Accountant (ACCA), with a motto “When “why” is clear, “how” is easier”. He is proficient in numeracy and impassioned with giving concise advice to a wide range of clients.

Picture of Junaid Usman
Junaid Usman

Junaid has been instrumental in the achievement of our success across various regions and he specialises in business management, accounting and tax advisory services.

Picture of Faizan Rashid
Faizan Rashid

Faizan is good at providing well-thought-out strategies and solutions to complex problems in Business Development which makes him a proficient overseer of our clients.

The quickest way from A to B is usually a conversation. So, if you want to find out more about how Legend Financial can boost your business, get in touch. We’ll give straight answers so you can make a confident decision, fast.

Most Popular

LET’S DO BUSINESS

The quickest way from A to B is usually a conversation. So, if you want to find out more about how Legend Financial can boost your business, get in touch. We’ll give straight answers so you can make a confident decision, fast.

[ninja_form id=’38’]

LET’S DO BUSINESS

Scroll to Top