VAT return guide
Reverse Charge VAT on Overseas Software and Ads: Google, Meta and SaaS Invoices Explained
If you are VAT registered and buy software, cloud tools or online advertising from a supplier based outside the UK that does not charge UK VAT, you work out the VAT yourself. Add 20% of the cost to box 1 as VAT due and the same amount to box 4 as VAT reclaimed, then put the cost in boxes 6 and 7. For most businesses the two VAT entries cancel out, so nothing extra is paid. If you are not VAT registered, these purchases can still push you towards the £90,000 registration threshold.
Reverse charge VAT return calculator
See what goes in boxes 1, 4, 6 and 7 for a service bought from abroad.
Convert foreign currency first
Boxes 1 and 4 cancel out, so the reverse charge costs you nothing. It still has to be on the return.
Uses the 20% standard rate. Convert foreign currency into pounds first, and include any overseas taxes shown on the invoice.
Why the reverse charge exists
For most services bought by one business from another, VAT is due where the customer belongs, not where the supplier is. When a supplier based in Ireland, the US or anywhere else outside the UK sells a service to a UK business, the supply is treated as taking place in the UK. Rather than make every overseas company register for UK VAT, HMRC makes the UK customer account for the VAT instead. That is the reverse charge.
It applies when all of these are true: the supplier belongs outside the UK, you belong in the UK, you are buying for your business, and the service is not exempt. HMRC says it applies based on where the supplier belongs, so it can apply even if the overseas supplier also has a UK VAT number.
- Supplier belongs outside the UK
- You belong in the UK
- You are buying for your business
- The service is not exempt
This is different from the domestic reverse charge for construction, which applies between two UK businesses.
Read the invoice first
What you do depends on what the invoice shows and who it comes from:
| What the invoice shows | What you do |
|---|---|
| UK VAT charged by a UK company or UK branch, with a UK VAT number | Normal UK purchase. Reclaim the VAT in box 4 as usual. No reverse charge. |
| No VAT, from a supplier outside the UK, often marked “reverse charge” or “customer to account for VAT” | Reverse charge: boxes 1, 4, 6 and 7. |
| VAT at 0% from an Irish or other overseas company | Usually a reverse charge. Treat it as above. |
| UK VAT charged by an overseas supplier to your business | Check it. HMRC says you cannot reclaim VAT that was charged incorrectly, so ask the supplier to confirm or correct the invoice. |
| UK VAT charged because you did not give a VAT number | If you are registered, add your VAT number to the account so future invoices are reverse charged. If you are not registered, the VAT is simply part of the cost. |
How popular suppliers bill UK businesses
Based on each company’s own billing or tax help pages, checked on 28 September 2026. Suppliers change their arrangements, so always go by the invoice in front of you.
| Supplier | Billed from | What UK businesses see |
|---|---|---|
| Google Ads | Google Ireland Limited, Dublin | No UK VAT on invoices for UK advertisers is common: account for it under the reverse charge. Google also adds a 2% UK Digital Services Tax fee, which forms part of the charge. |
| Google Workspace (business accounts) | Google Cloud EMEA Limited, Dublin | Google says business customers self account for VAT: reverse charge. |
| Google Cloud | Google Cloud EMEA Limited, Dublin | Google says UK usage is subject to 20% VAT. Check the invoice for UK VAT before reclaiming. |
| Amazon Web Services | AWS Europe, UK branch | UK VAT charged with a UK VAT number. Reclaim normally. |
| Zoom | Established outside the UK | No UK VAT for business customers: reverse charge. |
| Slack | Slack Technologies Limited, Dublin | UK VAT removed once you give a UK VAT number: reverse charge. |
| Adobe | Adobe, billed from outside the UK | VAT removed once you add your VAT number: reverse charge. |
| Mailchimp | Mailchimp (Intuit), billed from outside the UK | VAT removed once you add your VAT number: reverse charge. |
| Upwork fees | Upwork, billed from outside the UK | 20% UK VAT unless you give a valid VAT number, then reverse charge. |
| Canva | Canva Pty Ltd, Australia | Canva says it charges UK VAT on all UK subscriptions, business or not. Ask Canva whether a reverse charge invoice is possible before reclaiming. |
| PayPal | PayPal UK Ltd, London | A UK company, so no reverse charge. |
No supplier in the table matches. Go by the invoice: no UK VAT means a reverse charge.
Other big platforms, such as Meta for Facebook and Instagram ads, LinkedIn and Microsoft, commonly bill UK businesses from companies in Ireland. The same test applies: if the invoice shows no UK VAT, reverse charge it; if it shows UK VAT and a UK VAT number, reclaim it normally.
Worked example
A VAT registered freelance designer on standard accounting pays an Irish software company the equivalent of £500 for an annual licence. No VAT is shown and the invoice says the customer must account for VAT.
| VAT return box | Entry |
|---|---|
| Box 1: VAT due on sales and other outputs | £100 |
| Box 4: VAT reclaimed on purchases | £100 |
| Box 6: total value of sales, excluding VAT | £500 |
| Box 7: total value of purchases, excluding VAT | £500 |
| Net effect on what you pay | £0 |
It feels odd to put a purchase in box 6, the sales box, but that is what HMRC’s guidance says. Our guide on how to do a VAT return covers every box.
Currency and timing
- Exchange rate: convert using the UK market selling rate at the time of the supply, or HMRC’s published period rate. Use the same method consistently.
- Which return: for a one off service, the VAT is due when the service is completed or when you pay, if earlier. For monthly subscriptions and ad spend, it is due at the end of each billing period or when you pay, if earlier.
- Value: use the full amount you paid, including any overseas taxes on the invoice.
Flat Rate Scheme users
This is where many sole traders go wrong. On the Flat Rate Scheme you normally cannot reclaim VAT on purchases, so it is tempting to either ignore reverse charge services or pay the VAT without reclaiming it. HMRC’s rule is different: keep reverse charge services outside the Flat Rate Scheme. Leave them out of your flat rate turnover, and record the VAT in boxes 1 and 4 as you would under normal accounting. The two entries cancel, so there is no extra cost.
Exempt and partly exempt businesses
If some or all of your sales are exempt, such as insurance, financial services, some training or residential lettings, you may not be able to reclaim all the VAT in box 4. The reverse charge then becomes a real cost, exactly as if a UK supplier had charged you VAT. Pick “Partly exempt business” in the calculator to see the effect.
Not VAT registered? Watch the threshold
Businesses that are not registered do not account for the reverse charge. But the value of most business services bought from overseas suppliers under the reverse charge counts towards your taxable turnover for the £90,000 registration threshold, as if you had supplied them yourself. That applies even if your own sales are exempt.
Say you spend £3,000 a month on ads from an overseas platform that does not charge you UK VAT. That adds £36,000 a year to your turnover for the threshold test. Once your own taxable sales pass £54,000 over any rolling 12 months, you are over £90,000 and must register. Our VAT threshold tracker helps you keep an eye on the running total.
How £36,000 of overseas ad spend eats into the £90,000 threshold
£0£90,000 threshold
- Your own taxable sales
- Overseas services, £3,000 a month
If you are not registered and do not give the supplier a VAT number, many overseas software companies will charge you 20% UK VAT as if you were a consumer. That VAT is a real cost you cannot reclaim.
Common mistakes
- Leaving reverse charge purchases off the return completely because “nothing is payable”.
- Entering the VAT in box 4 but forgetting box 1, which makes the return claim money back that is not due.
- Forgetting boxes 6 and 7.
- Reclaiming UK VAT that an overseas supplier charged incorrectly.
- On the Flat Rate Scheme, adding reverse charge purchases to flat rate turnover.
- Not counting overseas services towards the registration threshold before you are registered.
Selling digital products to customers in the EU is the other side of this coin. See our guide to VAT on digital services to EU consumers.
Checking a UK invoice instead?
Add or remove 20% VAT in seconds with the free VAT calculator.
Frequently asked questions
Do I pay VAT on Google Ads in the UK?
If you are VAT registered and your invoice from Google Ireland shows no UK VAT, you account for it yourself under the reverse charge. For most businesses the VAT in box 1 and box 4 cancels out.
Do I have to include Facebook ads on my VAT return?
Yes, if you are VAT registered and the invoice comes from an overseas company without UK VAT. Put the VAT in boxes 1 and 4 and the cost in boxes 6 and 7.
Does the reverse charge cost me anything?
Not if you can reclaim all your VAT. It is a real cost if you are partly or fully exempt.
I am on the Flat Rate Scheme. What do I do?
Keep the purchase out of your flat rate turnover and record the VAT in boxes 1 and 4. The net effect is nil.
My supplier charged UK VAT. Can I reclaim it?
If the supplier is a UK company or UK branch with a UK VAT number, yes. If it is an overseas company charging UK VAT on a business purchase, ask it to confirm the treatment first, because HMRC does not allow VAT that was charged incorrectly to be reclaimed.
How do I check a supplier’s VAT number?
For UK numbers, use HMRC’s Check a UK VAT number service, or check the format first with our VAT number checker. EU numbers can be checked on the European Commission’s VIES service.
For any other VAT sum, try our VAT calculator, or read more about VAT for sole traders and freelancers.
Sources: HMRC, VAT Notice 741A; HMRC, VAT Notice 700/12; HMRC, VAT Notice 733; suppliers’ own billing and tax help pages. This page is general information, not tax advice.