A change that occurred at the start of January to EU VAT rules will impact UK businesses providing virtual events, online courses, and other digital services to consumers in the EU.

As of 1 January, these changes mean that VAT will is now due where the consumer is based, rather than where the supplier is located.

What has changed?

Previously, many digital services were taxed where the supplier was established.

Under the new rules, the place of supply is determined by where the consumer resides.

This means that VAT must be charged at the local rate of the consumer’s EU member state, and UK businesses will need to register for VAT in the EU, either through:

• The One Stop Shop (OSS) – allowing businesses to report VAT across all 27 EU member states via a single return.
• VAT registration in each applicable EU country where they have customers. No VAT registration threshold applies – meaning even small-scale suppliers will be affected.

The rules for B2B supplies remain unchanged – VAT will still be due where the business customer is based, and the reverse charge mechanism applies.

Double taxation and no taxation

One of the biggest concerns for UK businesses is the risk of double taxation or no taxation at all:

• Double taxation – Under UK VAT law, a UK business may still have a UK VAT liability as well as an EU VAT liability, leading to potential overpayment.
• No taxation – If an EU business sells digital services to UK consumers, it may not be subject to VAT in either jurisdiction.

HM Revenue & Customs (HMRC) has been made aware of these issues, but no UK tax law changes have been confirmed.

Businesses must take action now to review their VAT position and avoid unexpected tax liabilities.

What UK businesses need to do

With these changes in place, UK businesses selling digital services to EU consumers should:

• Review VAT obligations – Determine whether OSS registration or direct EU VAT registration is needed.
• Assess pricing structures – Consider whether VAT-inclusive or VAT-exclusive pricing is the best approach.
• Update terms and conditions – Ensure contracts reflect new VAT rules to avoid compliance risks.
• Monitor UK tax law developments – Stay informed about HMRC’s response to potential double taxation risks.

The new VAT rules bring major changes for UK businesses operating in the EU.

Our team can help you understand your obligations, register for OSS or local VAT, and structure your pricing to stay compliant.

If you need advice on how these changes will affect your business, get in touch today.