What tax rules apply if I sell services internationally from the UK?

Understanding what “selling services internationally” means for UK tax

When you sell services internationally from the UK, “tax” rarely boils down to one simple rule. In practice you are navigating several overlapping systems: UK direct taxes (income tax or corporation tax), UK National Insurance (in many cases), VAT rules (which depend heavily on where your customer is and what you are supplying), and sometimes overseas taxes such as withholding tax or local consumption taxes. The right answer depends on who you are (sole trader, partnership, limited company), what you do (consulting, software, design, training, advertising, professional services, digital services), where your client is based, where you perform the work, and how your contract is structured.

The good news is that most UK-based service providers can sell abroad without “automatically” creating a tax bill in every country where clients live. The less-good news is that a few common scenarios do trigger complexity: providing services physically in another country; selling certain kinds of digital services to consumers; contracting with overseas clients who deduct withholding tax from your invoice; or inadvertently creating a taxable presence overseas through people, premises, or agents. This article breaks down the major UK rules you need to consider and the overseas issues that commonly arise, so you can price correctly, invoice correctly, and avoid unpleasant surprises.

Start with your business structure: sole trader vs limited company

The core UK tax rules for international services start with how you operate.

If you are a sole trader, your profits are taxed under income tax rules. You pay income tax on taxable profits and usually Class 2 and Class 4 National Insurance, with payments typically made through Self Assessment. Your profits are generally calculated on an accounting basis (cash or accruals depending on eligibility and election), and foreign income from services is included in your UK trading profits.

If you operate through a limited company, the company pays corporation tax on its taxable profits. You may then pay yourself via salary and/or dividends, and those have their own tax and National Insurance consequences. The company’s profits from overseas clients are still UK taxable if the company is UK resident for tax purposes (which is usually the case if it is incorporated in the UK and centrally managed there).

In both cases, UK tax usually applies to your worldwide profits if you are UK resident (as an individual) or UK resident (as a company). For most UK-based service exporters, the international element changes the VAT and overseas-tax picture more than it changes the UK income/corporation tax charge itself.

UK residence and where tax is paid: the “worldwide income” principle

If you are UK resident as an individual, the default position is that you are taxed in the UK on your worldwide income and gains. Similarly, a UK-resident company is generally taxed in the UK on its worldwide profits.

That does not mean you never pay tax abroad. It means the UK usually wants to tax the profit, but you may also face tax in another country if that country has taxing rights under its domestic law. When the same income is taxed in two countries, double tax relief may be available (often through a double tax treaty, sometimes through unilateral relief rules). In practical terms, you may end up paying the higher of the two countries’ effective tax rates, not both in full, but the mechanics can be fiddly.

It is worth keeping a simple mental model: UK residence drives whether the UK taxes your profit. Overseas presence and local rules drive whether another country can also tax some of that profit. VAT (and similar consumption taxes) sit to one side and follow “place of supply” and “customer location” rules more than residence rules.

How UK direct tax works when your customer is overseas

For most UK service providers doing work from the UK, selling to overseas customers simply increases turnover, and the UK tax computation follows normal rules: income minus allowable expenses equals profit; profit is taxed under income tax or corporation tax.

There is no special “export of services” relief that removes UK tax just because the customer is abroad. Your UK tax liability depends on profit levels and rates, not on where clients are.

However, international work can affect direct tax in a few ways:

1) Foreign taxes on your invoices. Some countries require the payer to deduct withholding tax from payments for certain services. If a client withholds 10% or 20% from your fee and pays it to their tax authority, you may still owe UK tax on the gross profit, but you might be able to claim foreign tax credit relief. The paperwork and treaty forms matter.

2) Travel and overseas working. If you perform services physically in another country, you can create a taxable presence there, especially if you have a fixed place of business or people habitually concluding contracts in that country. Even without a permanent establishment, some countries tax non-residents providing services locally after a threshold number of days. This can lead to local filings and a need to apportion profit.

3) Currency. If you invoice in foreign currency, exchange differences can affect taxable profit. You’ll need a consistent method to translate income and expenses into sterling and handle foreign exchange gains and losses appropriately under your accounting framework.

4) Client entertainment, marketing, and agent costs. International expansion can change your expense profile, and some costs are restricted for tax. For example, business entertainment is generally not deductible for UK tax purposes even if it helps win overseas business. This matters for direct tax and for VAT recovery.

VAT is often the biggest “international services” issue

If you sell services internationally from the UK, VAT rules are often the area that causes the most confusion. The key concepts are:

Place of supply (where the supply is treated as made for VAT purposes), customer status (business customer vs consumer), customer location, and type of service (general rule services vs land-related, event-related, digital services, and other special categories).

VAT is not about where you are resident. It is about where the supply is deemed to take place. If the place of supply is outside the UK, you may not charge UK VAT (subject to rules and evidence), but the supply may be subject to VAT or similar taxes in the customer’s country. Conversely, if the place of supply is in the UK, you may need to charge UK VAT even if the customer is overseas, though this is less common for “general” services supplied to overseas businesses.

Do you even need to be VAT registered?

VAT only comes into play if you are VAT registered (or required to be registered). Many smaller service providers assume that selling abroad “doesn’t count” toward VAT thresholds. That is not always true. In broad terms, most taxable supplies you make can count toward the UK VAT registration threshold, including many services supplied to UK customers and certain supplies to overseas customers. Some supplies with a place of supply outside the UK may not count toward the threshold, depending on the exact rules and whether they would be taxable if made in the UK. This can be a subtle area, so as turnover grows it is wise to check how your supplies are classified.

Even if you are not required to register, you can voluntarily register. That can be helpful if you incur significant input VAT on UK costs and want to reclaim it, but it can also introduce compliance obligations and, for UK consumer clients, may increase your prices.

General VAT rule for services: B2B vs B2C

The starting point for many services is the “general rule” for place of supply:

Business-to-business (B2B): The place of supply is usually where the customer belongs. If your customer is a business established outside the UK, the place of supply is generally outside the UK, meaning you do not charge UK VAT. The customer may account for VAT in their own country under a reverse charge mechanism (if their country’s rules require it).

Business-to-consumer (B2C): The place of supply is usually where the supplier belongs. If you are established in the UK and you sell a general service to a consumer abroad, the place of supply is typically the UK, and you may need to charge UK VAT if you are VAT registered.

This B2B/B2C distinction is critical. Selling to overseas companies is often easier from a UK VAT perspective than selling to overseas consumers, because many B2B supplies fall outside the scope of UK VAT under the general rule.

Proving your customer is a business for VAT purposes

If you treat a supply as B2B and outside the scope of UK VAT, you need to be comfortable that your customer is genuinely “in business” and belongs where you say they belong. In practice, you should gather evidence and keep it with your records. Depending on where they are established, that might include a VAT number (for certain jurisdictions), a business registration number, a company website, a contract showing a business name, and correspondence from a business email domain.

For some countries and customer types, there may not be a neat “VAT number” equivalent. The key is to apply reasonable checks and maintain documentation, because your VAT treatment depends on it.

Invoices for overseas customers: what changes?

For many international service sales, the “right” invoice is mostly about clarity:

If you charge UK VAT: Your invoice should show VAT at the correct rate and the usual VAT invoice details.

If the supply is outside the scope of UK VAT under the B2B general rule: You normally issue an invoice with no UK VAT. Many businesses add wording such as “Outside the scope of UK VAT” or “Reverse charge may apply in the customer’s jurisdiction,” but the exact phrasing is less important than having the correct VAT treatment and good evidence of customer status and location.

If the customer will withhold tax: Make sure your contract and invoice anticipate this, and confirm whether amounts are “gross” or “net of withholding.” If the client withholds, you will want documents (withholding certificates) to support any foreign tax credit claim in the UK.

Also consider currency and payment terms. If you invoice in foreign currency, decide whether your contract fixes the sterling equivalent or leaves currency risk with you. Your accounting system should handle the conversion consistently.

Special VAT rules you can’t ignore

Not all services follow the general B2B/B2C place of supply rules. Several categories have special rules that can bring the place of supply into the customer’s country or into the location of an event or land. Common examples include:

Land and property related services: Many services connected with land are treated as supplied where the land is located. If you advise on, manage, or work directly with overseas property, this can create VAT obligations abroad and possibly change UK VAT treatment.

Admissions to events and certain event-related services: Tickets and admission-type supplies can follow the location of the event. If you run conferences or training events abroad, you may be dealing with local VAT rules in the event country.

Restaurant and catering services: Often supplied where performed.

Transport-related services: Can follow special rules depending on passenger vs freight transport and other factors.

“Digital services” to consumers: If you supply certain digital services (such as streaming, downloads, apps, online gaming, or similar automated digital content) to consumers, many jurisdictions treat the place of supply as where the consumer is located. This can trigger non-UK VAT registrations or special schemes. Even if you are “just a consultant,” parts of your offering might cross into digital services depending on how automated and digital the supply is.

If your business model sits anywhere near these categories, it is worth mapping each product or service line to the relevant VAT rule rather than assuming everything is “general consulting.”

Selling to EU customers: practical VAT considerations

For UK businesses selling services to EU customers, the general VAT principles still apply: for many B2B services, the place of supply is where the EU business customer belongs, and you do not charge UK VAT. The EU customer may apply the reverse charge in their country.

Where it becomes more complex is B2C sales and special-category services. If you sell services to EU consumers, you may still be making UK place-of-supply supplies for “general” services (meaning UK VAT could apply if you are registered). But if you supply digital services to consumers or services tied to events or land, you may need to consider the consumer’s country VAT rules and any required registrations or schemes.

Also, if you buy services from EU suppliers (for example, software subscriptions, advertising platforms, design support), you may have to account for VAT under a reverse charge in the UK if you are VAT registered. International selling often goes hand-in-hand with international buying, and the VAT position on costs is part of the overall picture.

Overseas withholding tax: the issue that surprises many service providers

VAT is not the only overseas tax risk. In many parts of the world, payments for services to a non-resident can be subject to withholding tax. The payer deducts a percentage from the invoice amount and pays it to their local tax authority. Common triggers include consulting, technical services, management fees, royalties, and sometimes software-related services.

From your perspective, withholding tax is not a UK tax; it is a foreign tax on your income. But it affects cash flow and pricing because you might receive less than your invoice amount. You may also need to do administrative work to reduce or reclaim withholding tax under a treaty.

How double tax treaties can help with withholding tax

The UK has double tax treaties with many countries. These treaties often limit the rate of withholding tax on certain types of income, and in some cases they say that business profits should only be taxed in the overseas country if you have a “permanent establishment” there. If you have no permanent establishment, the treaty may support a position that the overseas country should not tax your business profits at all, which could mean no withholding tax should be applied (or it should be refunded).

In reality, clients sometimes withhold tax anyway because local rules or internal policies require it unless you provide specific forms or certificates of residence. You may need to obtain proof that you are UK resident for treaty purposes and provide it to the client. The exact form and process varies by country and can be slow, so plan ahead.

Foreign tax credit relief in the UK

If foreign tax is genuinely suffered on your service income, you may be able to claim foreign tax credit relief against your UK tax on the same profits. The relief is usually capped at the amount of UK tax attributable to that income, so it prevents double taxation but does not always fully refund the foreign tax if the foreign rate is higher or if the UK tax on that income is lower.

To claim relief, you generally need evidence of the foreign tax paid, such as withholding tax certificates or official receipts. Without documentation, relief can be hard to support. Keep a clean trail: contracts, invoices, payment advices, and any certificates from the overseas tax authority or client.

Permanent establishment: when selling services abroad becomes “doing business” abroad

A major question in international tax is whether your activities create a taxable presence in another country. For companies, that presence is often called a “permanent establishment” (PE). The phrase is also used in treaties, and while the details vary, the concept is broadly similar: if you have a sufficiently fixed place of business in a country, or people there who habitually conclude contracts on your behalf, the country may have the right to tax the profits attributable to that PE.

For a UK service provider, PE risk usually increases when you do one or more of the following:

Maintain a fixed office or premises abroad. Renting office space, having a branch, or using a space that is effectively at your disposal can be relevant.

Employ or contract personnel in the foreign country. Especially if they are client-facing, negotiate or sign contracts, or represent the business in a way that looks like an overseas operation.

Spend substantial time delivering services in the foreign country. Some treaties and local laws have specific “service PE” thresholds where providing services in-country for more than a certain number of days can create a PE, even without a fixed office.

Use dependent agents. If someone in the country acts exclusively or almost exclusively for you and has authority to bind you, that can create PE exposure.

If you create a PE, you may need to register for local corporate taxes, file returns, keep local accounts, and apportion profits. That is a larger leap in complexity than simply having overseas clients. Many UK businesses sell internationally for years with no PE abroad because the work is delivered remotely from the UK and contracts are concluded in the UK.

Working overseas as an individual: income tax and social security angles

If you are a sole trader or you personally travel to provide services overseas, you should think about more than corporate PE concepts. Some countries tax non-resident individuals on income earned for work performed in their country. Even short engagements can trigger tax obligations depending on the country’s rules, the length of stay, and whether a treaty applies.

There is also a social security angle. If you are temporarily working in another country, you may need to consider whether you remain within the UK National Insurance system or whether local social security contributions arise. The answer depends on where you go and how long you work there, and it can involve certificates or forms to show where you are covered. This is an area where planning matters, because it affects both cost and compliance.

Digital services and online delivery: where many modern businesses sit

Many UK businesses “sell services” that are actually a mix of human expertise and digital delivery: online courses, subscription communities, SaaS tools, templates, automated reports, or AI-assisted outputs. Tax rules may treat different parts of your offering differently. For VAT, a key dividing line is often whether the supply is essentially automated and delivered digitally with minimal human intervention (which tends to push it into “digital services” rules) versus a bespoke service delivered by a person (which tends to follow general services rules).

If you sell online courses with live tutoring, that might be treated differently than a purely self-serve video library. If you provide a monthly retainer for consulting plus access to a portal, you may have to decide whether you are making one composite supply or multiple supplies for VAT purposes. Getting this classification right affects whether you charge UK VAT, whether overseas VAT obligations arise, and what evidence you must keep about your customers’ locations.

Pricing and contract terms: bake tax realities into the deal

International tax and VAT issues are not just compliance matters; they affect commercial terms. Consider these contract points when selling services overseas:

Fees and withholding tax. State whether fees are gross (client bears withholding tax on top) or net (withholding tax is deducted from the fee). Many UK suppliers prefer gross-up clauses so they receive the agreed amount, but bargaining power varies.

VAT and other sales taxes. Clarify that VAT (or equivalent) is charged where applicable. For B2B international supplies where the customer accounts for tax under a reverse charge, it’s still helpful to align expectations.

Customer location and status. Ask for the customer’s establishment address and (where relevant) tax/VAT registration number. Make it part of onboarding so you can apply correct VAT treatment from day one.

Scope of work and where it will be performed. If you might deliver part of the work on-site overseas, include language that allows you to manage compliance costs or renegotiate if overseas tax obligations arise.

Dispute resolution and governing law. This is not tax, but it can matter if you end up needing documentation for treaty relief or dealing with foreign authorities.

Record-keeping: what you should track from the start

Good records are the difference between a manageable international tax position and a stressful scramble. Consider tracking:

Customer status: business vs consumer, with supporting evidence.

Customer location: billing address, place of establishment, and any corroborating evidence you rely on.

Service classification: notes on whether a service is general, land-related, event-related, or digital/automated.

Where the work was physically performed: travel dates, countries visited, and purpose. This is useful for PE analysis, local tax exposure, and sometimes for expense claims.

Foreign tax withheld: certificates, receipts, and client confirmations. Store them against the relevant invoices.

Currency and conversion: exchange rates used, bank statements, and accounting system outputs.

Contracts and statements of work: because they often determine the tax character of a payment (services vs royalties vs mixed supply) and whether a withholding tax should apply.

Common scenarios and how the rules usually play out

To make the principles more concrete, here are a few typical scenarios for UK service providers.

Scenario 1: UK consultant providing strategy services to a US company remotely

If you are UK-based and provide consulting remotely to a US business with no travel and no US presence, your profits are still taxable in the UK as normal. For VAT, if you are VAT registered, the supply is typically B2B and the place of supply is where the customer belongs (outside the UK), so you usually do not charge UK VAT. You should keep evidence that the customer is a business and is established in the US.

Withholding tax is less common in the US for pure services paid to foreign vendors in many business contexts, but it can arise in some arrangements or if the payment is characterised differently. Your contract and the client’s processes matter.

Scenario 2: UK designer selling services to EU consumers

If you sell design services to consumers (not businesses) in the EU, the general B2C rule often treats the place of supply as the UK (where you belong). If you are VAT registered, you may need to charge UK VAT, even though the client is overseas. This can surprise people who assume “export = no VAT.”

However, if what you supply is not a general service but a special-category service, different rules may apply. The exact VAT outcome depends on the service type and delivery model.

Scenario 3: UK trainer delivering an in-person workshop in another country

When you deliver services physically abroad, you need to think about local tax and VAT. Event-related and admissions rules may apply for VAT-type taxes. The country may require local VAT registration for event services or may impose local reporting. For direct tax, if your presence is short and you have no fixed base, a treaty may prevent income tax on business profits, but some countries still require filings or apply local rules in practice. If the engagement repeats or becomes significant, the risk of creating a taxable presence increases.

Scenario 4: UK agency providing marketing services and paying for overseas ad platforms

On the sales side, B2B marketing services provided to overseas business clients are often outside the scope of UK VAT under the general rule. But on the cost side, if you buy digital advertising or other services from overseas suppliers while VAT registered, you may need to account for UK VAT under the reverse charge (and potentially reclaim it, depending on your VAT recovery position). Your profit remains taxable in the UK, but VAT compliance becomes more involved.

Scenario 5: UK business selling a subscription SaaS tool to consumers worldwide

This is where the “digital services” rules can become central. Many countries treat certain digital services as supplied where the consumer is, potentially requiring you to charge local VAT/sales tax and register or use special schemes. The compliance footprint can expand quickly as you scale. Even if you call what you sell a “service,” tax systems may treat it more like electronically supplied content or software access.

How international selling affects your UK expense claims

International work often introduces costs: travel, accommodation, software tools, overseas subcontractors, translation, payment processing fees, and foreign bank charges. Most genuine business costs incurred wholly and exclusively for the trade are deductible for UK direct tax (subject to normal restrictions). But there are a few traps:

Entertainment: Client entertainment is generally not deductible for UK tax and has restricted VAT recovery, even if it feels like a business development necessity in overseas markets.

Travel with mixed purpose: If a trip is part business, part personal, you may need to apportion costs and only claim the business element.

Home office and remote work: If you run your international service business from home, you may claim appropriate use-of-home expenses, but keep it reasonable and documented.

Subcontractors overseas: Paying overseas freelancers can be straightforward, but keep contracts and invoices, and consider whether you are buying services that trigger VAT reverse charge rules if you are VAT registered.

Cash flow planning: tax timing and international payments

International sales can be slower to pay and more vulnerable to currency swings. From a UK tax perspective, you still need to plan for tax payments on profits, even if cash collection lags. Consider:

Payment terms: Shorter terms reduce cash flow strain.

Deposits and milestone billing: Helps align cash with work performed.

Currency strategy: Decide whether to hold foreign currency balances, convert immediately, or use hedging tools. Accounting treatment should match your strategy.

Tax reserves: Set aside for UK income/corporation tax and, if relevant, VAT liabilities, especially if you are expanding quickly.

When you might need specialist advice

Many UK businesses can handle international service sales with good bookkeeping and a basic understanding of VAT place of supply. But certain triggers make specialist advice particularly worthwhile:

You plan to deliver services on-site abroad regularly or set up any kind of overseas base.

You are seeing consistent foreign withholding tax and need treaty relief, gross-up clauses, or efficient processes.

You sell digital services to consumers across multiple countries and may need registrations or schemes.

You have mixed supplies (for example, consulting plus software access plus content) and need to classify for VAT.

You are hiring abroad or using overseas agents who negotiate or sign deals.

Your turnover is approaching VAT thresholds and your international supply mix affects whether you must register.

Practical checklist: staying compliant when selling services abroad from the UK

Here’s a practical list you can work through as you expand internationally:

1) Confirm your UK tax position. Know whether you are a sole trader or company, keep clean accounts, and understand how profits will be taxed in the UK.

2) Map your services. Classify each service line: general services, land-related, event-related, digital/automated, or other special categories.

3) Identify customer type and location. Build onboarding steps to confirm whether each customer is a business or consumer and where they belong.

4) Set VAT treatment rules. For each service and customer type, decide whether you charge UK VAT, treat it as outside the scope, or need other treatment.

5) Build compliant invoicing. Ensure invoices show VAT correctly when applicable and clearly reflect the nature of the supply and the contracting parties.

6) Watch for withholding tax. Ask overseas business clients early whether they withhold tax; include contract clauses; collect certificates when tax is withheld.

7) Track overseas working days and presence. Keep travel logs and assess whether your activities could create a taxable presence abroad.

8) Keep evidence. Store contracts, proof of customer status/location, and any tax certificates in a way you can retrieve quickly.

9) Price with taxes in mind. If you might suffer withholding tax or need local registrations, build that into pricing or contract terms.

10) Review regularly. As you add new countries, new product lines, or new delivery methods, re-check the tax and VAT implications.

Key takeaways

Selling services internationally from the UK is often straightforward from a UK direct tax perspective: profits are generally taxable in the UK under the usual income tax or corporation tax rules. The bigger variables are VAT place of supply rules, whether your customers are businesses or consumers, and whether the service category has special VAT treatment.

Overseas taxes can enter the picture through withholding tax and through creating a taxable presence abroad, especially if you deliver services physically in another country or build an overseas footprint through people, premises, or agents. The most reliable way to stay on top of this is to systemise your customer checks, service classification, invoicing, and record-keeping, and to treat any new country expansion or new delivery model as a trigger for a fresh tax review.

With a clear framework and good documentation, many UK service providers can expand internationally with confidence, keeping compliance manageable while focusing on what actually drives success: delivering great work and building strong client relationships across borders.