What changed?
The reverse charge can apply more broadly to business recipients of relevant overseas services.
From 1 April 2027, the proposed reverse charge would be limited to VAT-registered businesses; overseas suppliers to unregistered UK businesses would account under normal rules.
Practical consequence: Overseas suppliers should verify customer VAT status and assess possible UK registration, invoicing and contract changes.
What happened?
Budget 2026 proposes narrowing the UK VAT reverse charge for services supplied from overseas. The measure is proposed, not yet enacted.
Key details
From 1 April 2027 the reverse charge would be restricted to VAT-registered business customers. An overseas supplier serving a non-VAT-registered UK business would instead account for UK VAT under the normal rules.
Who is affected?
Overseas service providers, non-VAT-registered UK business customers, platforms and advisers managing cross-border service contracts may be affected.
Effective date / timing
The government proposes commencement on 1 April 2027 through Finance Bill 2026–27. Final legislation and guidance remain pending.
Why it matters
The compliance obligation may move from the UK recipient to the overseas supplier where the customer is a business but is not VAT registered.
Business impact
Suppliers should validate VAT numbers, review customer onboarding, pricing, invoices, contracts and UK registration exposure. Customers should assess cash-flow and irrecoverable VAT effects.