Cross-border VAT changes from 2010
For some time there has been consultation concerning crossborder supplies of goods and services; how they can be simplified and how potential fraud can be better monitored and prevented. A series of provisions, announced over four Budget Notices (74-77), addressed these issues and clarified the changes due from 1 January 2010.
Place of supply of services UK businesses will have to account for VAT via the reverse charge mechanism on most services received from overseas suppliers. The changes will be phased in on 1 January 2010, 2011 and 2013. These changes will affect those services supplied to business customers which currently are subject to VAT in the supplier’s country as well as on services which are judged to be supplied in the country in which they are performed. In essence, this means that VAT will no longer be charged by suppliers of these services to business customers but will instead be accounted for by business customers as a reverse charge in their member state.
Time of supply rules From 1 January 2010 there will be a change to the tax point for UK businesses buying in services from overseas. VAT is currently due when the services are paid for. However, from that date the tax point of a supply will be when a service is ‘performed.’ This means that the tax point of a single supply of services will be at completion of the service unless an earlier tax point has been created by receipt of payment beforehand. The tax point of a continuous supply of services will be at the end of each billing or payment period or on payment received where this is earlier. In reality there will be no impact upon your cashflow as VAT will be paid over and claimed back on the same VAT return under the reverse charge mechanism.
EC sales lists From 1 January 2010 UK businesses supplying services to customers belonging overseas and who are required to account for VAT in their country via the reverse charge mechanism must include such services on their EC Sales Lists (ECSLs), currently only applicable to intra-community supplies of goods. Businesses will only have 14 days (paper version) or 21 days (electronic) to file ECSLs rather than the current six weeks. HMRC may require monthly ECSLs where values exceed £70,000.
Refunds of VAT incurred in other member states The final changes in this category, to be implemented from 1 January 2010, affect refunds of foreign VAT. Paper claims to overseas authorities will go and be replaced by electronic claims to the VAT authorities in the country in which the claimant is established. For example, UK businesses will file an electronic claim to HM Revenue and Customs. Other changes relating to deadlines for making and paying claims will also be implemented.
For more information about how this change may affect you or about optional change of rate rules and anti-forestalling legislation or if you would like to discuss the potential impact the changes to cross-border transactions may have upon your business contact Janice Rozario on 0161 245 1048 or email jrozario@clbcoopers.co.uk