VAT for Tech & SaaS
Digital services and software companies face unique VAT obligations in the UK, especially post-Brexit. The "place of supply" rules determine whether UK VAT applies at all — and getting this wrong is one of the most common audit failures for tech businesses.
VAT Rate by Transaction Type
UK SaaS subscription (B2B)
Standard-rated. UK business customer receives invoice with 20% VAT charged.
UK SaaS subscription (B2C)
Standard-rated. UK consumer is charged 20% VAT on all digital subscriptions.
Software licence (perpetual)
A perpetual software licence is a supply of services and is standard-rated at 20%.
Custom bespoke development
Software development services are standard-rated supplies in the UK.
SaaS to EU Business (post-Brexit)
Outside UK scope. EU customers self-account via One Stop Shop (OSS). You may not charge UK VAT.
App store sales (B2C EU)
Apple/Google handle VAT collection as the 'seller of record' in most EU markets.
Hosting & cloud infrastructure
Charged to UK businesses at standard rate. IaaS and PaaS are standard-rated services.
Open source with support contract
The support/subscription element is what is being sold — standard-rated.
Place of Supply Rules Explained
For digital services, VAT is charged based on where the customer belongs, not where your business is located. For UK-registered SaaS companies selling to:
- UK businesses (B2B): Charge 20% UK VAT on all invoices.
- UK consumers (B2C): Charge 20% UK VAT on all transactions.
- EU businesses (B2B): Outside UK VAT scope — use reverse charge. Issue zero-rated invoice.
- EU consumers (B2C): Must register for EU VAT via OSS or in each member state.
- USA/Rest of world businesses: Outside UK VAT scope — no VAT charged.
For subscription pricing at common SaaS price points, see our VAT on £99, VAT on £250 or VAT on £1,000 monthly plan breakdowns.