Hi Kate,
About reverse charges…
Normally when you buy services from a UK supplier, your supplier is required to charge you VAT and they pay it over to HMRC. But when a business buys services from a supplier based abroad, and the “place of supply” is deemed to be the UK, the obligation to account for the VAT generally falls on the customer. The supplier raises their invoice without VAT and the customer pays the VAT-exclusive amount to the supplier. The customer must then calculate the VAT due, and pay it over to HMRC. As this arrangement for paying VAT to HMRC is effectively the other way round from normal, it’s called a “Reverse Charge”.
The amount that a customer has calculated and paid to HMRC as a reverse charge is still VAT incurred their expenditure. So if they would have been able to reclaim the VAT charged by a UK supplier (because the service is being used in the course of their “VATable” business), they can reclaim the reverse charge VAT in the same way.
Cross border services is the type of reverse charge that probably affects most businesses – and a “logic” for having it is to save foreign suppliers having to register for VAT in every country that they have customers in. There are other reverse charges though, that can apply to transactions that are wholly in the UK. One that came into force from the start of March applies to many construction works. Generally, the reason given for introducing domestic reverse charges is to combat perceived areas of fraud. If the VAT on both sides of a transaction (the supplier’s sale and the customer’s purchase) is accounted for by the same person, there’s no risk to HMRC of a customer reclaiming VAT which their supplier never actually paid over.
Going back to your original question about Google…
You do still need to apply the reverse charge process to this transaction. EU VAT laws require suppliers to put a note on their invoices to EU customers reminding them when a reverse charge is necessary. The fact that we’re no longer in the EU means that suppliers might no longer need to include that note. But the “place of supply” rules in the UK haven’t changed, so we’re still required to do the reverse charge. I’m assuming that your accounting software does the VAT calculations if you pick the “Purchase of Services Under Reverse Charge” option?
Hope this helps!
Trevor