I am based outside the UK so why has VAT been applied to my token purchase?

The guidance below will help you understand why VAT has been applied to the purchase of Easy MTD VAT tokens.

HMRC's "Use and Enjoyment" rules override the normal B2B supply of service rules. The following is an extract from an internal HMRC manual - VAT Place of Supply of Services:

The use and enjoyment rules apply to telecommunications services and broadcasting services (B2B and B2C); electronically supplied services (B2B); hired goods; hired means of transport and insurance repair services(B2B).

Effective use and enjoyment takes place where a recipient actually consumes services irrespective of the contractual arrangements, payment or beneficial interest. This additional provision corrects instances of distortion which remain as a result of considering only where the provider and the customer belong. It would be distortive, for example for supplies such as telecommunications services, that are actually consumed outside the UK, to be subject to UK VAT. Equally, it would be distortive for there to be no UK VAT on such services where they are consumed in this country.

Since our service (i.e. the provision of Easy MTD VAT submission tokens) is one of submitting VAT returns to HMRC for UK VAT registered businesses (i.e. an electronically supplied service (B2B)), there can be no doubt that the service is consumed in the UK. Therefore, VAT appears on all invoices where Easy MTD VAT submission tokens have been purchased regardless of where the business that purchased them resides.