Unfortunately it’s not straight forward, there are some factors that need to be considered. First, it’s necessary to establish whether the government department has a “business establishment” or “fixed establishment” which is closely connected to the supply, within the foreign country – see sections 3 and 4 of HMRC’s notice 741A https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a. Although much of this is worded more to allow foreign organisations to determine whether they have an establishment in the UK, the same principles apply. If they don’t have an “establishment” that is closely connected to the supply in the foreign country, your supply is being made to their UK base and you will have to charge UK VAT.
If they do have an establishment there, you need to know whether your supply is “business to business” (B2B) or “business to consumer” (B2C). This could be difficult for you to determine yourself and it would be best to ask them. Provided that they tell you that they’re in business and:
- if it’s an EU member state, they provide their VAT registration number in that country, which you can verify on VIES https://ec.europa.eu/taxation_customs/vies/
- if it’s any other country,they provide a copy of any relevant paperwork showing that they’re established as a business there,
then you can treat your supply as B2B. Otherwise, it will be B2C.
Then you need to determine the place of supply. There is a “general rule” that B2C supplies are considered to take place where the supplier belongs, whereas B2B supplies take place where the customer belongs. However there are a number of types of supply that are exceptions to this general rule, so worth having a quick check through sections 7 to 14 of notice 741A linked to above. Once you’ve determined the place of supply:
- If it’s in the UK, you will have to charge UK VAT.
- If it’s abroad, you should not charge UK VAT. Your customer may be liable to account for foreign taxes there. If it’s in the EU, it is good practice to include your customer’s VAT registration number and a reference to the “Reverse Charge” on your invoice.