Selling software, apps, SaaS, streaming, e-books or online courses sounds simple until VAT enters the picture. Digital services follow their own place-of-supply rules, so where your customer lives -- and whether they are a business or a consumer -- can change everything. Add Brexit, which ended UK access to VAT MOSS, and a UK creator selling to the EU suddenly faces real compliance choices. This guide explains what counts as a digital service, the £90,000 registration threshold, UK-to-UK versus UK-to-EU place-of-supply rules, the B2B versus B2C split, the 0% zero rate for e-books and online newspapers, and a practical example of a UK creator selling online courses to EU customers in 2026/27.
What Counts as a Digital Service
A digital service (also called a digitally supplied or electronically supplied service) is delivered over the internet or an electronic network with little or no human intervention. The defining feature is automation. Common examples include:
Downloadable or cloud software and mobile apps.
Software-as-a-Service (SaaS) subscriptions.
Streaming of music, films, games and other media.
E-books, digital downloads and online publications.
Website hosting and online advertising.
Pre-recorded online courses and automated e-learning.
The boundary matters: a live, tutor-led webinar delivered in real time is generally not a digital service, because there is genuine human intervention. It is taxed under the general place-of-supply rules instead. So the same business can have some supplies that are digital services and others that are not, each with different VAT treatment.
The £90,000 Registration Threshold
A UK business must register for VAT once its taxable turnover exceeds £90,000 in any rolling 12-month period, or when it expects to cross that figure within the next 30 days. The test is a rolling one -- not aligned to the tax year -- so digital businesses with growing subscription revenue need to monitor it continuously.
You can also register voluntarily below the threshold. For digital businesses with significant software, platform, advertising or development costs, voluntary registration is often worthwhile because it allows you to reclaim input VAT on those costs.
Once registered, you charge VAT at the standard rate of 20% on your standard-rated UK supplies, file VAT returns under Making Tax Digital, and pay the net VAT to HMRC. Note that the £90,000 threshold applies to UK supplies -- the rules for cross-border B2C sales to EU consumers operate separately, as we explain below.
Place-of-Supply Rules
The place of supply decides which country has the right to tax a sale, and it depends on whether the customer is a business or a consumer.
B2B (business customers)
For business-to-business digital services, the place of supply is where the customer belongs. For cross-border sales the customer typically accounts for the VAT under the reverse charge, so you do not charge VAT but must record the supply correctly and verify the customer's VAT number.
B2C (consumers)
For business-to-consumer digital services, the place of supply is where the consumer belongs. VAT is due in the consumer's country at that country's rate. A UK business selling an app to a consumer in Germany must, in principle, charge German VAT.
UK-to-UK
For purely domestic sales, UK VAT applies in the normal way -- 20% on standard-rated digital services to UK customers, whether business or consumer, with qualifying publications zero-rated. The complications arise once you cross a border.
Selling to the EU After Brexit
Before Brexit, a UK business could declare VAT on all its B2C digital sales to EU consumers through a single UK VAT MOSS (Mini One Stop Shop) return. Since the UK left the EU VAT system, UK businesses can no longer use the Union MOSS.
To sell B2C digital services to EU consumers and account for the VAT due in each country, a UK business now has two options:
Register for VAT in each EU member state where it has consumers, filing a return in each -- administratively heavy.
Register for the EU Non-Union One Stop Shop (OSS) through a single chosen EU member state, declaring all EU B2C digital sales on one OSS return -- the practical equivalent of the old MOSS for non-EU businesses.
For goods sold to EU consumers, the related Import One Stop Shop (IOSS) scheme can simplify import VAT, but for B2C digital services the relevant route is the Non-Union OSS. B2B sales to EU businesses continue to use the reverse charge, so no VAT is charged provided the customer's VAT number is verified.
Zero-Rated E-Books and Online Newspapers
UK VAT treats electronic publications in line with their printed equivalents. Electronic versions of books, newspapers, magazines, academic journals and similar qualifying publications are zero-rated (0%).
In practice this means a UK business selling e-books or e-newspapers to UK customers charges no VAT on those products, while still being able to reclaim input VAT on associated costs -- the best of both worlds.
However, not everything digital qualifies. Publications that are wholly or predominantly devoted to advertising, or to audio or video content, generally fall outside the zero rate and remain standard-rated at 20%. Always check the specific HMRC guidance on which electronic publications qualify before applying 0% to a product.
Worked Example: A UK Creator Selling Courses to the EU
Imagine a UK creator selling a pre-recorded online course. The course is automated, so it is a digital service. Here is how the VAT plays out across different sales:
Sale
VAT treatment
UK consumer (B2C)
20% UK VAT (if registered)
UK business (B2B)
20% UK VAT (if registered)
EU consumer (B2C)
VAT at the consumer's country rate, via Non-Union OSS
EU business (B2B)
No VAT charged -- reverse charge (verify VAT number)
To sell to EU consumers compliantly, the creator registers for the EU Non-Union OSS through a chosen member state, collects two pieces of location evidence per consumer (such as billing address and IP address), charges the correct local rate, and files a single OSS return. UK sales go on the normal Making Tax Digital VAT return.
If the creator instead ran a live, tutor-led version of the course, it would not be a digital service and the place-of-supply analysis would differ. The lesson is that automation, customer type and customer location together determine the VAT outcome. Use the VAT calculator to work out the VAT element of a price quickly.
Frequently Asked Questions
What counts as a digital service for VAT?
For VAT purposes, digital services (often called digitally supplied or electronically supplied services) are services delivered over the internet or an electronic network with minimal or no human intervention. Typical examples include downloadable or cloud software and apps, Software-as-a-Service (SaaS) subscriptions, streaming of music, films and games, e-books and digital downloads, website hosting, online advertising, and pre-recorded online courses. The key test is automation: if the supply is essentially automatic, it is a digital service. A live, tutor-led webinar delivered in real time generally is not a digital service, because there is real human intervention -- it is taxed under the general place-of-supply rules instead.
When do I need to register for VAT in the UK?
A UK business must register for VAT when its taxable turnover exceeds the registration threshold of £90,000 in any rolling 12-month period, or when it expects to exceed it within the next 30 days. Digital services supplied to UK customers count towards this turnover. You can also register voluntarily below the threshold, which lets you reclaim input VAT on your costs -- often worthwhile for digital businesses with significant software, advertising or platform expenses. Once registered, you charge VAT on your standard-rated UK supplies, file VAT returns (now under Making Tax Digital) and pay the net VAT to HMRC. Watch your rolling turnover carefully, as the test is not based on the tax year.
What is the place of supply for digital services?
The place of supply determines which country has the right to tax a sale, and it differs by customer type. For business-to-business (B2B) digital services, the place of supply is where the customer belongs, and the customer usually accounts for the VAT under the reverse charge. For business-to-consumer (B2C) digital services, the place of supply is where the consumer belongs -- meaning VAT is due in the consumer's country at that country's rate. So a UK business selling an app to a consumer in France must, in principle, charge French VAT. Getting the place of supply right, and evidencing where the customer belongs, is the heart of digital-services VAT compliance.
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How do I charge VAT on digital services within the UK?
For UK-to-UK supplies of digital services, the rules are straightforward. If you are VAT-registered, you charge UK VAT at the standard rate of 20% on standard-rated digital services to UK customers, whether they are businesses or consumers, and account for it on your UK VAT return. Certain digital products are zero-rated -- notably e-books, e-newspapers and electronic versions of other qualifying publications -- so no VAT is charged on those, although you can still reclaim related input VAT. If you are not registered (turnover below £90,000 and not voluntarily registered), you do not charge VAT at all. Keep clear records distinguishing standard-rated and zero-rated digital supplies.
How has Brexit changed VAT on digital services to the EU?
Before Brexit, UK businesses could use the EU VAT Mini One Stop Shop (MOSS) to declare VAT on B2C digital sales to all EU consumers through a single UK return. Since the UK left the EU VAT system, the Union MOSS is no longer available to UK businesses. To sell B2C digital services to EU consumers and account for the VAT due in each country, a UK business must either register for VAT in each EU member state where it has consumers, or register for the EU's Non-Union One Stop Shop (OSS) scheme through a single EU member state. This added a significant compliance step for UK digital sellers that previously relied on UK MOSS.
What is the difference between B2B and B2C for VAT?
The distinction drives who accounts for the VAT and where. In B2B digital sales, the customer is a business -- you obtain and verify their VAT number, and for cross-border EU sales the customer accounts for VAT under the reverse charge, so you do not charge VAT but must record the supply correctly. In B2C digital sales, the customer is a private consumer with no VAT number, and VAT is due in the consumer's country at that country's rate, which the seller must collect and remit (via OSS or a local registration for EU sales). Because the treatment is so different, it is essential to confirm and evidence whether each customer is a business or a consumer.
Are e-books and online newspapers zero-rated for VAT?
Yes. Since the rules were aligned with printed publications, electronic versions of books, newspapers, magazines, academic journals and similar qualifying publications are zero-rated (0%) for UK VAT. This means a UK business selling e-books or e-newspapers to UK customers charges no VAT on those products, while still being able to reclaim input VAT on associated costs. Care is needed because not everything digital qualifies: publications that are predominantly devoted to advertising, audio or video content, or that are intended primarily for completion (such as some interactive products) may fall outside the zero rate. Check the specific HMRC guidance on which electronic publications qualify before applying 0%.
Can UK businesses still use VAT MOSS?
No. The Union VAT MOSS scheme that UK businesses used before Brexit to report B2C digital sales across the EU through a single UK submission is no longer available to UK businesses, because the UK is outside the EU VAT system. The replacement route for selling B2C digital services to EU consumers is to register for the EU Non-Union One Stop Shop (OSS) via a chosen EU member state, or to register for VAT individually in each EU country where you have consumers. UK businesses still account for UK VAT on UK sales through their normal Making Tax Digital VAT return -- it is specifically the cross-border EU reporting that changed.
How do I prove where my customer belongs?
For B2C digital services, you must collect and keep evidence of the consumer's location, because it determines which country's VAT applies. Acceptable evidence typically includes the billing address, the IP address of the device used, the country code of the SIM card for mobile purchases, the location of the bank or card issuer, and other commercially relevant information. The general rule for digital services is that you need two non-contradictory pieces of evidence to establish the customer's location. Your payment platform or e-commerce system usually captures this automatically, but you remain responsible for retaining the records to support the VAT treatment if HMRC or an EU authority queries it.
I sell online courses to EU customers -- how do I handle VAT?
It depends on whether the course is a digital service and who the customer is. A pre-recorded, automated online course is a digital service, so B2C sales to EU consumers are taxed in the consumer's country -- you would register for the EU Non-Union OSS or in each member state to collect and remit the correct local VAT. A live, tutor-led course delivered in real time is not a digital service and follows different place-of-supply rules. For B2B sales to EU business customers, the reverse charge generally applies and you do not charge VAT, provided you verify the customer's VAT number. UK sales follow normal UK VAT, and qualifying e-learning publications may even be zero-rated.
Disclaimer: This guide reflects UK and EU VAT rules for digital services as they apply in 2026/27. Registration thresholds, place-of-supply rules, OSS/IOSS procedures and zero rates can change, and EU rates vary by member state. This guide is for general information only and is not professional tax advice. Consult a qualified VAT adviser and refer to gov.uk for current official guidance before relying on any treatment.
