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Cross border changes
In our January 2009 VATupdate, we reported on someproposed changes to cross border transactions involvingboth suppliers and recipients of cross border services.These changes will come into effect on 1 January 2010.The main change will be to the place of supply of businessto business supplies of services. The general rule will bethat the place of supply of such services will be where thecustomer is established (and not as now, where the supplier is established). As always, however, there will be exceptionsto the general rule (land, hiring of certain means of transportand cultural, sporting, scientific and educational services).The VATrules for business to consumer supplies will remainunchanged for now.The time of supply for reverse charge services will changefrom the invoice date to the earlier of:
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completion of the service, or
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the receipt of payment.EC Sales Lists (ESLs) currently required for Intra EUsupplies of goods to VATregistered customers will also berequired for Intra EU supplies of services, covered by thegeneral rule and where the customer is required to accountfor VATunder the reverse charge procedure.ESLs for services will have to be reported on a calendar quarterly basis.ESLs for goods will also be subject to a number of changesfrom 1 January next year:
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For quarterly value of supplies of intra EU goods above£70,000 (based on previous four calendar quarters), thereporting period will be one month (currently quarterly).
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For quarterly value of supplies of intra EU goods below£70,000, the reporting period will be calendar quarterly.However, a business can opt to file both ESLs monthly.Filing can be on paper or electronically. The filing deadlinefor the paper option will be 14 days from the period end and21 days for electronic filing. The current form VAT101 willbe used for both goods and services (indicator code 3 for services).Businesses should now be considering how the new ruleswill affect them and what changes may be needed to capturethe relevant data. The first stage will be to obtain overseascustomers’VATnumbers.
...continued
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Online VAT returns - a reminder
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Agent update
VAT update
Also featured in this issue:
VAT rate increase on 1 January 2010
The current temporary reduction in the standard rate of VATwill end on 31 December 2009. With effect from 1 January2010, the VATrate will revert back to 17.5%. HMRC hasrecently announced that retail businesses remaining openpast midnight on New Year's eve will be allowed to continuecharging VATat 15% on their sales until they close or until6.00am on 1 January 2010. There has been pressspeculation that the rate could be increased to 18% or 19%,to generate much needed revenue for the Government. Atthe time of going to print, this remains speculation.Businesses should ensure that they are ready for thechange. Systems may have to cope with both VATratesduring the transitional period, for sales and purchases.The normal tax point rules will determine which VATrate toapply to supplies of goods and services, however,businesses can choose to apply special transitional rules.These rules deal with supplies which span the rate changeand how to treat deposits, pre-payments etc.Anti-forestalling legislation was introduced in the Finance Act2009 to prevent abuse of the increase in the VATrate, egmaking unusually large prepayments. However, these rulesshould not affect the majority of normal businesstransactions.HMRC have published detailed guidance on their website toassist businesses to deal with the change and have set outfull details of the anti-forestalling rules. The good news isthat they have indicated that they will apply a 'light touch' toany errors made in the first VATreturn submitted after thechange in rate.
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