[petercooper]

Some basic examples.

My British corporation pays an American company for Web hosting. However, the US company does not charge us VAT, so we have to charge ourselves ("reverse charge") the VAT at UK rates and then immediately claim back the VAT as it is used in our VATable supplies. The net result is zero but reverse charging means they get VAT revenue for situations where VAT is not reclaimable (many exist).

Another example is that my British corporation sells services to a, say, French corporation. We charge no VAT on this sale but the French corporation has to then "reverse charge" French VAT on the sale within France (and then claim it back, if valid). We then also have to file this transaction on an "EC Sales List" so that the various authorities can check that the reverse charge did occur.