A UK entity or an overseas marketing supplier, and what the invoice and the VAT line actually change

British buyers often treat a UK registered supplier as the safe option and an overseas one as the cheap option, and the tax half of that instinct is usually wrong. For a VAT registered British business that can reclaim its input tax in full, the VAT treatment of an overseas supplier is an entry on both sides of the VAT return rather than a cost. What genuinely differs is enforcement, currency exposure, working hours, where your data sits and who carries the risk when something goes wrong. Decide on those, and treat the VAT line as administration.

What the VAT rules actually say

HMRC's own notice on the place of supply of services, read on 22 October 2026 at VAT Notice 741A on gov.uk, sets out the mechanism in four sentences worth quoting rather than paraphrasing.

• "The reverse charge applies to almost all B2B supplies of services except exempt supplies."
• "The reverse charge does not apply to supplies of services where both the supplier and the customer belong in the UK. It only applies where services are supplied in the UK by a supplier belonging overseas."
• "It applies if your supplier belongs outside the UK even if they have a UK VAT registration number."
• "Where it applies to services which you receive, you, the customer, must act as if you are both the supplier and the recipient of the services."

And the sentence that settles the cost question for most buyers: "If you can attribute the input tax due under the reverse charge to your taxable supplies (and so can reclaim it in full) then the reverse charge has no net cost to you."

The standard rate the entry is calculated at is 20 per cent, stated on the gov.uk VAT rates page, read the same day, which records that "The standard rate of VAT increased to 20% on 4 January 2011".

Nothing here is tax advice. Take your own position to your accountant, particularly if your business is partly exempt.

Where the VAT difference becomes a real cost

• You are not VAT registered. Below the registration threshold, which the gov.uk registration guidance puts at total taxable turnover of GBP 90,000 over the last 12 months, you have no return to reclaim through. A UK supplier charges you VAT you cannot recover and an overseas supplier does not charge it at all, which makes the overseas invoice genuinely cheaper on the same fee.
• You are partly exempt. Where input tax cannot be attributed in full to taxable supplies, part of the reverse charge sticks. The notice says so in the same passage, and this is the case to check with your accountant before signing.
• Your bookkeeping cannot handle it. The entry is simple and it has to be made. A supplier relationship that produces a quarterly argument with your bookkeeper has a cost even when the tax does not.

The differences that should actually decide it

On payment terms, government guidance read on 22 October 2026 at gov.uk on late commercial payments states that where a payment date is agreed "it must usually be within 30 days for public authorities or 60 days for business transactions", and that statutory interest for business to business transactions is "8% plus the Bank of England base rate". The same page notes that statutory interest cannot be claimed where the contract sets a different rate, which is worth reading before accepting a supplier's own terms.

The British vocabulary problem, which costs more than the VAT

A supplier who does not work in this market daily gets British wording wrong in ways that cost real money. Hire means rent here and buy nowhere else, so an advertising account built on American keyword assumptions pays for the wrong intent. Prices quoted to consumers include VAT, and a campaign that advertises the excluding figure creates a claims problem as well as a conversion one. Postcode districts work where a radius does not. Bank holidays fall on different dates from the American calendar and the trading peaks move with them.

None of that is a reason to rule out an overseas supplier. It is a reason to brief one properly and to put the British specifics in writing, and it is why the cheaper fee is often not the cheaper engagement in the first quarter.

When an overseas supplier is the right answer

• The work is specialist and the specialism is thin here. Paying for the right skill in another time zone beats paying for an approximation locally.
• The work is production rather than judgement. Build, implementation and volume production travel well.
• Your own market is not Britain. A supplier close to the market you are selling into beats one close to your office.
• You can reclaim input tax in full and the fee difference is large. At that point the tax argument disappears and only the practical ones remain.

What to put in the contract either way

• Governing law and jurisdiction, named. For a British buyer, England and Wales, Scotland or Northern Ireland as appropriate.
• Currency and who carries exchange movement. A fee in pounds removes the question entirely.
• Payment terms, with a date, and a decision on whether statutory interest is being replaced.
• A data processing agreement naming where personal data is processed and which subprocessors are used.
• Account and asset ownership. Advertising accounts, analytics and the domain in your company's name, with the supplier granted access.
• Notice and handover, including source files and a stated number of working days.

Questions about hiring a UK or an overseas marketing supplier

Do British buyers insist on a UK registered company?

Larger buyers with a formal procurement process frequently do, because it simplifies contracting, insurance and recourse. Smaller buyers care far more about who answers the phone and when.

Does an overseas supplier charge us VAT?

Under the notice quoted above the reverse charge applies to almost all business to business supplies of services from a supplier belonging overseas, which means you account for the VAT yourself rather than the supplier charging it. Where you can reclaim the input tax in full, HMRC's own wording is that it has no net cost to you.

Our supplier is overseas but has a UK VAT number. Does that change it?

The notice addresses that directly and says the reverse charge "applies if your supplier belongs outside the UK even if they have a UK VAT registration number". Where the supplier belongs is the test, not where it is registered for VAT.

We are not VAT registered. Is an overseas agency genuinely cheaper?

On the same fee, an invoice with no VAT on it costs less than one with 20 per cent added that you cannot reclaim. Weigh that against the briefing time and the recourse you give up.

Should we insist on being invoiced in pounds?

It is the simplest way to remove exchange exposure and bank margin from a long engagement, and most suppliers will agree to it. Ask at proposal stage rather than after the first invoice.

What is the most common surprise on an overseas engagement?

Response time rather than quality. Three hours of overlap turns a same day fix into a two day one, and the effect shows up in paid media before anywhere else.

The currency a machine reads off your page

There is one more place the pounds question matters, and we found it on our own site before we found it anywhere else. Fetched as a crawler with no cookies and no language header, our pricing page used to return rupee figures only, because the currency conversion ran in the browser and a crawler sends none of the signals the detector looks for. An assistant asked what this costs in Britain read our page and found rupees. It was fixed the same day by printing every region's prices into the document on every request, and the visible text now carries 15 dollar figures, 5 pound, 5 euro and 31 rupee. The lesson applies to any supplier selling across borders: the price in your HTML is the price a machine repeats, whatever your front end shows a human. AI Knows Us measures what those answers say about a named business across ChatGPT, Gemini, Perplexity, Claude and Google AI Overviews, and the pound specific version of the same problem for British sellers is in our note on the pound price and the VAT line.