Guidance

Domestic reverse charge for telecommunications services

Find out how your VAT invoices are affected by the reverse charge if you're a wholesale electronic communications supplier in the UK.

• From: HM Revenue & Customs
• Published: 18 August 2016
• Last updated: 31 December 2020 — See all updates

This reverse charge is designed to prevent wholesale supplies of telecommunication services from being exploited for missing trader VAT fraud.

How the reverse charge applies

If you’re a service carrier in the telecommunications industry, your supplies will be subject to the reverse charge if you’re making wholesale supplies to one of the following in the UK:

• other service carriers
• network operators to supply users such as consumers

You can only use the reverse charge for business to business sales where both businesses are registered or should be registered for VAT. There are no value thresholds for your sales.

Where the reverse charge applies, your customer will account for the VAT instead of you as the supplier.

Customers

How you use the reverse charge can be affected by your customers’ situation. You can find more detailed information on the checks you can carry out on your customers, to make sure you apply the reverse charge correctly, in The VAT domestic reverse charge procedure (Notice 735).

Supplies within the charge

All your wholesale supplies of telecommunications services to counterparties established in the UK will be subject to the reverse charge, with certain exclusions.

The reverse domestic charge applies to:

• speech communication with no, or almost no, delay between the signal being transmitted and received, including switched voice over internet protocol services
• transmission of:
  • writing, such as wholesale short messaging services (SMS)
  • images, including wholesale multimedia messaging services
  • sounds

Specific examples include, but are not limited to:

• wholesale ‘Over The Top’ telecommunications messages
• SMS hubbing
• SMS and voice aggregator services

Exclusions

The domestic reverse charge will not apply to:

• data transmission only services, such as broadband
• indefeasible right of use charges
• wholesale line rental and lease lines
• supplies:
  • within Schedule 10A or section 8 of the VAT Act 1994, which relate to face value vouchers and supplies from abroad
  • to a corporate group for onward supply and consumption within that corporate group
• return of unused minutes not originally within the reverse charge

Multiple supplies

If you’re supplying a combination of services, some within and some outside the reverse charge, you can separate them to apply the reverse charge only to those within.

If it’s impossible or not practical for you to separate the services in this way, you can treat the whole supply as within the reverse charge.

Invoicing

In addition to all the normal information needed for a VAT invoice, you must also make a clear note on the invoice that:

• the domestic reverse charge applies
• the customer must account for the VAT

If the computer system you use for producing VAT invoices cannot show the amount due under the reverse charge, check section 7.6.1 of The VAT domestic reverse charge procedure (Notice 735).

Tax points

Your provision of a telephonic service is a continuous supply of services. The tax points you must use are the earlier of:

• the issue of a VAT invoice
• the receipt of payment

In certain circumstances, where there is a delay beyond one year in your issuing a VAT invoice or getting payment, an annual tax point will apply.

Sales list

You do not need to complete a reverse charge sales list for supplies within the telecommunications services VAT reverse charge.

Published 18 August 2016
Last updated 31 December 2020 + show all updates

1. 31 December 2020

   This page has been updated because the Brexit transition period has ended.

2. 18 August 2016

   First published.