UK VAT Place of Supply Rules for Online Course Creators: Human Intervention Test Explained (2025)

Picture this: You’re a UK-based financial coach who has just sold a £497, 6-module online course. Your customer is a small business owner in Dublin, Ireland. You’re staring at your invoicing software, wondering: “Do I charge the standard 20% UK VAT? The 23% Irish VAT? Or no VAT at all?” If you’ve felt this intense confusion, you’re not alone—and the complexity is magnified if the course includes a single, live Q&A session.

Getting VAT wrong on cross-border digital sales isn't just confusing—it can be incredibly expensive. HMRC penalties for incorrect VAT can be severe, not to mention the potential interest and back-payments owed to EU tax authorities. The post-Brexit regulatory landscape, particularly around the EU's 'place of supply' rules and the critical distinction between 'automated' and 'live' digital services, has left many UK course creators and coaches operating in a challenging grey zone. Understanding the **Human Intervention Test** is now non-negotiable for compliance.

The 'Place of Supply' Rule: Why Your Customer's Location Matters

The fundamental problem for course creators lies in the concept of **Place of Supply**. Think of 'place of supply' as the 'place of taxation'. For most physical goods and traditional, face-to-face services, the place of supply is typically where the service provider is located (the UK). But for **Electronically Supplied Services (ESS)**—which includes digital courses, downloadable content, and software—the rule shifts entirely for sales to consumers (B2C) in the EU.

For ESS sold B2C in the EU, the place of supply is determined by the **customer’s location**. This means you are essentially treated as if you were running a business in your customer’s country, and you must charge their local VAT rate. This is a crucial difference from selling physical goods. This matters because HMRC data shows that in 2024/25, the UK VAT registration threshold is £90,000, but for automated digital sales to EU consumers, **there is effectively no threshold**—you owe the EU country's VAT from the very first sale (HMRC VAT Notice 741A, 2024). Without the correct system in place, you’d have to register for VAT in every single EU country where you have a customer.

To avoid this complex, multi-country registration process, the EU introduced the **One-Stop-Shop (OSS)** system. For UK sellers, this is the **Non-Union OSS**. Think of the Non-Union OSS like a dedicated VAT 'post office'—you drop off all your collected EU VAT payments there (via HMRC's portal), and the system distributes the money to the correct member states. It simplifies the reporting and payment, but it doesn't remove the obligation to charge the correct local VAT rate.

The Human Intervention Test: Automated vs. Live Services

This is where the line blurs for many course creators. Is your service an Electronically Supplied Service (ESS) that falls under the B2C "customer location" rule, or is it a non-ESS that follows the B2C "supplier location" rule? The distinction hinges on the **Human Intervention Test**.

An ESS is defined as a service that is "delivered over the internet or an electronic network and which is essentially automated, involving minimal human intervention" (HMRC VAT Notice 741A, 2025). The moment significant human involvement is necessary for the supply to happen, the service often ceases to be an ESS, and the place of supply typically reverts to the UK (the supplier’s location). This has a profound impact on how you charge VAT.

The general HMRC position is that **live, human-led services**—such as live group coaching via Zoom, one-to-one tutoring, or live-streamed webinars where participants can interact in real-time—are typically **not** ESS. Consequently, if you are UK VAT registered, you would charge UK VAT (20%) to the customer, regardless of their location (be it the EU, US, or elsewhere). This is a game-changer for businesses that mix pre-recorded courses with live elements.

Scenario-Based Breakdown: The Course Creator’s VAT Table

To make sense of this, let's break down the four most common scenarios UK digital sellers face. The table below shows exactly whose VAT rules apply and what you need to charge in each case. Notice how a single factor—the customer, the service type, or their business status—changes the entire VAT treatment.

As you can see, the same core product—an online course—can trigger four completely different VAT treatments depending on who buys it, whether they're a business or consumer, and whether human intervention is involved. This is why generic "just charge 20% VAT" advice fails. For example, the reverse charge mechanism (Scenario 3) shifts the administrative burden from you, the seller, to the business buyer, which is a significant cash-flow advantage for you.

The Two-Proof Rule and Practical Implementation

So, you've identified that your French consumer needs French VAT, and your German business customer needs the reverse charge. Now what? The key challenge becomes proving the customer's location and status.

To avoid massive fines for under-declared VAT, EU rules require digital sellers to collect and hold **two non-contradictory pieces of evidence** to confirm the customer’s location for B2C sales. This is known as the **Two-Proof Rule**. Evidence can include the customer’s billing address, IP address location, bank country, phone number prefix, or SIM card country. I've seen many platforms like Stripe and PayPal attempt to gather this for you, but ultimately, the compliance burden rests with the seller. This is not a trivial compliance step; HMRC and EU tax bodies are increasingly enforcing this data-gathering requirement, as it underpins the entire ‘place of supply’ rule.

For B2B sales (where you apply the reverse charge), the mandatory requirement is to verify the customer’s EU VAT Identification Number using the EU's **VIES (VAT Information Exchange System)** database. Without this VIES verification, you generally cannot justify applying the 0% reverse charge and should treat the sale as B2C (HMRC VAT Notice 741A, 2025).

The "De Minimis" Threshold for Non-ESS Services

While ESS sales have no EU threshold, non-ESS services (like live coaching) sold B2C to EU customers *do* follow an old EU rule. If your total annual sales of these services (and a few others) to EU consumers is under a low threshold of €10,000 (around £8,500), you can charge UK VAT instead of the local EU VAT. However, this is a complex threshold and many high-volume sellers opt for the OSS from the start to simplify compliance and prepare for growth. The safest approach is often to understand where you are likely to breach this threshold, as the tax authority expects vigilance (European Commission Taxation and Customs Union data, 2025).

Common Questions About VAT for Digital Course Creators

Based on questions I've seen across UK freelancer forums and Reddit's r/UKPersonalFinance, here are the three most common points of confusion that trip up digital sellers:

If my course has a monthly live Q&A, is it still an ESS?

The key word is **mandatory** or **significant**. If the live Q&A is a mandatory, core part of the course and requires your human effort to deliver, HMRC is likely to agree it is a non-ESS service. This means the place of supply is the UK, and you charge UK VAT (if UK VAT registered). If the live Q&A is merely an optional add-on that a customer could skip without impacting the core value of the automated course, the whole thing is likely still classed as an ESS, and you must apply the B2C customer-location rule and use the OSS system for EU consumers. The general rule: the more personalized and mandatory the human element, the less likely it is to be ESS.

I sell via a major platform (e.g., Udemy/Etsy). Who is responsible for the VAT?

In most cases, if you sell digital content through a marketplace or platform, the platform is considered to be the seller for VAT purposes. This is known as the **deemed supplier** rule. If this applies, the platform handles all the complexities of the OSS system, Two-Proof Rule, and local VAT rates. This removes a huge compliance burden from you. However, you must confirm with your platform exactly how they treat their sellers—some simply act as a payment processor, leaving you with the VAT liability. Always check their terms and conditions for their exact VAT treatment.

If I'm not yet UK VAT registered, can I just ignore EU VAT on digital sales?

No, absolutely not. The UK’s £90,000 VAT registration threshold only applies to sales within the UK (or sales that are zero-rated, such as B2B reverse charge sales). For B2C digital sales to EU customers, the place of supply is the customer's country. Their local rules apply, and those rules almost universally have a zero threshold for sales of imported digital goods. You are required to register for the Non-Union OSS from your very first sale to an EU consumer. Failure to do so can result in retrospective VAT demands and penalties from the specific EU country involved, even if you are below the UK threshold (HMRC VAT Notice 741A, 2024).

Conclusion: Your Next Steps

Understanding UK VAT on digital services comes down to three core principles: **know your customer’s location** (using the Two-Proof Rule), **distinguish B2B from B2C** (using the VIES check for reverse charge), and, most critically for course creators, **pass the Human Intervention Test** to determine if you are selling an Electronically Supplied Service (ESS). The treatment for a fully automated course is vastly different from a blended course with live coaching.

If you're a UK course creator selling digital products internationally, start by auditing your product line: which elements are automated and which require live interaction? Then, audit your last 20 sales: where were your customers located? Did you charge the correct VAT? For most sellers dealing with automated B2C sales to the EU, the Non-Union OSS system, despite its administrative overhead, simplifies compliance dramatically by allowing one quarterly return for all EU VAT. However, VAT rules are intricate and penalties for errors are severe—this guide provides a framework, but for your specific business model and product mix, always consult a qualified VAT accountant who understands cross-border digital sales.