Reverse charge self-assessment

What it means

Under reverse charge self-assessment the customer, not the supplier, declares the tax. The same return also deducts it, so with full deduction rights the cash effect is nil.

It applies to services received from abroad under the place of supply rules, to the domestic reverse charge on defined goods and works, and to some imports.

Self-assessment is not an exemption. The supply stays taxable; only the person who declares the tax changes. So a service from abroad takes the VAT rate and rules of the customer’s country, not those the supplier would apply at home, and a foreign invoice showing zero tax says nothing yet about how much tax has to be declared.

How it works in practice

The books record output and input tax and report both sides in the control statement. The supplier’s invoice carries no tax but a reverse charge note.

A company without full deduction rights, for example one applying a pro rata, actually pays under self-assessment. That is where an oversight costs money, not just paperwork.

Documents from foreign suppliers often arrive late, or only as an email confirming a card payment. Under self-assessment, however, the tax is declared by the date the tax liability arises, not by the day the client sends us the invoice. So every month we match card payments on our clients’ statements against documents and ask for the missing ones straight away.

What to watch out for

A non-VAT payer receiving an EU service must register under section 7a and pay the tax with no deduction. Advertising and cloud services from abroad are where this is missed most.

Even though self-assessment is financially neutral with full deduction, missing it still costs work. Putting it right means a supplementary return and a corrected control statement for every period affected, and with dozens of small subscriptions a year that takes longer than booking them correctly from the start.