Reverse-charge VAT on Chinese sourcing agent fees
Usually yes, if a UK business buys taxable general-rule services from a supplier belonging overseas. Check the service and place of supply first; work done in China is not enough to decide. Recovery depends on the normal input-tax rules. Confirm the invoicing company with Cambridge China Bridge.
Identify the purchase before deciding the VAT
Start with the contract and invoice. Are you buying goods from a seller, or paying separately for supplier searches, inspection reports or development work? Our guide to agent or seller contracts explains that distinction.
For this check, gather the separately purchased services rather than treating the whole goods order as an agent fee. Keep the goods paperwork alongside them for your accountant; import VAT on goods is covered separately.
Check the service and place of supply
The business-to-business general rule places a service where the customer belongs. Check exceptions before applying it. Separately bought sourcing, inspection or development work therefore needs a classification check, rather than a decision based only on where staff perform it.
Give your accountant the actual deliverables: supplier introductions and negotiation, an inspection report, drawings, prototype work or physical samples. For development projects, distinguish design work from purchases of tooling and goods. Ask them to record which place-of-supply rule applies.
Confirm which company supplies the service
HMRC says the reverse charge usually applies when an overseas business supplies taxable services to a UK business. Ask for the supplier's legal name, address and contracting entity, and identify the establishment supplying the work.
Cambridge China Bridge is a UK company with its own staff in China. China-based staff do not give you enough information to classify its invoice as an overseas service purchase. Confirm the contractual supplier and VAT treatment before posting it. Our sourcing fee guide explains the charging arrangements. For overdue sourcing invoices, see our late-payment charges guide.
Give your accountant a usable instruction
Send the contract, invoice, service scope, report or drawings, payment record and your VAT registration status. Ask: ‘Please confirm the supplier's and customer's VAT places of belonging, classify the service, check exceptions, and confirm whether reverse-charge accounting applies.’
Then ask them to confirm the taxable value, sterling conversion, applicable rate, reporting period and VAT Return entries. If you are not VAT registered, specifically request a registration review covering these overseas service purchases before deciding how to record them.
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Check recovery before treating VAT as neutral
Where the reverse charge applies, you account for VAT yourself and recover input tax subject to the normal rules. A partly exempt business may not recover all its input tax. Ask your accountant to confirm the recoverable amount rather than assuming the entries cancel.
Keep their written conclusion with the invoice and supporting scope. Recheck when the supplier, contracting entity or work changes, especially when a development project moves from design services into prototype, tooling or production purchases.
Frequently asked questions
Does a Chinese sourcing agent invoice mean reverse-charge VAT?
Usually for taxable general-rule services supplied by an overseas business to a UK business. Confirm the supplier, service classification and place of supply before posting the invoice.
Does inspection work in China escape UK VAT?
The location of the inspection alone does not decide. Ask your accountant to classify the service and apply the relevant place-of-supply rule.
What if I am not VAT registered?
Send the overseas service invoices and your registration status to your accountant. Request a registration review before assuming there is nothing to do.
Can I reclaim all reverse-charge VAT?
Recovery follows the normal input-tax rules. Partial exemption can restrict recovery, so have your accountant confirm the deductible amount.