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AI Overview
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Yes, VAT is generally charged on software in the UK at the standard rate of 20%. Software is considered an "electronically supplied service" (e-service), which is a taxable supply for VAT purposes.
The specific rules depend on the location and status of both the seller and the customer:
UK Business selling to a UK Customer (B2B/B2C): A UK-based business must register for VAT if its taxable turnover exceeds the £90,000 threshold (as of April 2024). Once registered, it must charge the standard 20% UK VAT on software sales to both businesses and consumers in the UK.
Non-UK Business selling to a UK Consumer (B2C): The non-UK business must register for UK VAT and charge 20% UK VAT from the very first sale to a UK consumer; there is no registration threshold in this scenario.
UK Business selling to a non-UK Business (B2B): No UK VAT is charged. The transaction is typically subject to the "reverse charge" mechanism, meaning the customer business accounts for the VAT in its own country.
UK Business selling to a non-UK Consumer (B2C): No UK VAT is charged. However, the sale may be subject to the VAT/sales tax rules of the consumer's country. For EU consumers, the UK business may need to register for VAT in each EU member state or use the EU's One Stop Shop (OSS) scheme.
Key Points:
Electronically supplied services include software downloads, SaaS (Software as a Service) platforms, and software updates.
The service must have minimal or no human intervention to be classified as an e-service for these specific VAT rules.
If you sell through an online marketplace (e.g., Apple App Store), the platform operator is often responsible for collecting and remitting the VAT o
n your behalf