UK Invoicing for Overseas Clients

Navigating the complexities of international business can be challenging, especially when it comes to invoicing overseas clients. For UK-based businesses, the post-Brexit landscape has brought about significant changes that need to be considered. Here’s a guide to help you understand the essentials.

Understanding VAT on International Transactions

• Goods and Services to EU Clients: Since Brexit, the UK is no longer part of the EU VAT regime. This means that VAT is no longer charged on goods and services sold to EU clients. Instead, the client may need to pay the VAT in their own country upon receipt of the goods or services. More details on GOV.UK.

• Goods Sold Outside the EU: For goods sold to clients outside the EU, VAT is not charged. However, the client may be subject to customs duties and taxes in their own country.
  
  

Currency Considerations

• Invoice in Client’s Currency: It’s often recommended to invoice overseas clients in their own currency. This can help avoid confusion and make the payment process smoother for the client.

• Exchange Rates: Be clear about the exchange rate you’re using. Consider using reputable financial sources or banks to determine the rate.
  
  

Banking and Payment Methods

• International Bank Charges: Be aware that international bank transfers can come with fees. Discuss with your client who will bear these charges.

• Alternative Payment Methods: Consider offering alternative payment methods like PayPal, TransferWise, or international credit card payments, which might be more convenient for some clients.
  
  

Legal and Contractual Considerations

• Contracts: Always have a clear contract in place that outlines payment terms, currency, delivery terms (like Incoterms for goods), and any other relevant details.

• Dispute Resolution: Specify a mechanism for resolving any disputes, preferably through mediation or an agreed-upon arbitration process.
  
  

Navigating Post-Brexit Changes

The UK’s departure from the European Union has brought about a series of changes that directly impact how businesses in the UK invoice their EU clients. Here’s a deeper dive into these changes:

• New VAT Rules:

  • Goods Valued at £135 or Less: For goods sold to EU customers valued at £135 or less, VAT is now collected at the point of sale. This means UK businesses need to charge and account for VAT at the time of the sale. More on this from GOV.UK.

  • Goods Valued Over £135: For goods over this value, VAT will be collected from the recipient, not at the point of sale. This is similar to how non-EU international sales have traditionally been handled.

  • Digital Services: For digital services provided to EU consumers, UK businesses now need to register for the VAT MOSS non-Union scheme in an EU member state. This scheme allows businesses to report and pay VAT for all EU sales in a single return. Further reading on VAT MOSS.

• Customs Declarations:

  • New Requirements: Selling goods to EU clients now requires customs declarations. This is a significant change, as prior to Brexit, intra-EU sales did not require such declarations.

  • Using a Customs Agent: Given the complexities of customs paperwork, many businesses opt to use a customs agent or broker to handle these declarations. This ensures accuracy and compliance with all regulations. Here’s a guide on how to make customs declarations.

• EORI Numbers:

  • Mandatory Requirement: If you’re moving goods between the UK and the EU, you now need an EORI (Economic Operators Registration and Identification) number that starts with GB. This unique ID is used in customs procedures and documentation. Check and get an EORI number.

• Tariffs and Trade Agreements:

  • UK-EU Trade and Cooperation Agreement: This agreement ensures that most goods traded between the UK and EU are not subject to tariffs or quotas. However, to benefit from these terms, businesses must prove the origin of their goods. Details on the rules of origin.
    
    

• Northern Ireland Protocol:

  • Special Considerations: The Northern Ireland Protocol means that different rules apply to goods entering Northern Ireland from Great Britain. This is to avoid a hard border between Northern Ireland and the Republic of Ireland. Businesses need to be aware of these differences when trading with Northern Ireland. More on moving goods into, out of, or through Northern Ireland.
    
    

Keeping Records

• Proof of Export: Keep detailed records of all international sales, including proof of export, to ensure you can justify zero-rated VAT sales if required.

• Client Details: Maintain a record of client details, including their VAT number (if they have one) and address, to prove the sale was international.
  
  

Cultural Considerations

• Payment Norms: Payment practices can vary widely between countries. Familiarize yourself with the payment norms in your client’s country to avoid misunderstandings.

• Communication: Always communicate clearly and professionally. Consider time zones when scheduling calls or expecting responses.

Conclusion

Invoicing overseas clients requires a thorough understanding of both UK regulations and the nuances of international business. By staying informed and adapting to the post-Brexit landscape, UK businesses can continue to foster strong international relationships and ensure smooth financial transactions. Always consider seeking advice from financial or legal professionals when dealing with complex international invoicing issues.