Your business will be affected by these changes if you:
- supply services to or receive services from overseas businesses
- supply goods to other EU member states
- incur VAT in other EU member states
Full details can be found at:
www.hmrc.gov.uk/vat/cross-border-changes-2010.htm
In brief, the main features of the 2010 changes are:
Amendments to the “place of supply” rules for intra-EC cross-border services
Currently the default position is that the place of supply is where the supplier is established, although there are many exceptions to this rule. From 1 January, the basic rule for business-to-business (B2B) supplies will be that the place of supply is where the customer is established, with the customer accounting under the reverse charge mechanism in the majority of instances. Again there will be a number of exceptions to the new general rule.
The place of supply of business-to-consumer (B2C) services will continue to follow the current rules.
Amendments to the “time of supply” rules for all supplies subject to the reverse charge in the UK
In the majority of cases, such services are currently treated as supplied when they are paid for. Under the new rules, the tax point will be the completion of the service, with an earlier tax point to the extent that the service is paid for beforehand. For continuous services, there will be a tax point at the end of each billing or payment period, with a deemed tax point on 31 December each year if there is no such period.
EC Sales Lists (ESL)
From 1 January, businesses will be required to submit quarterly ESL’s to provide information on intra-EC supplies of services to which the reverse charge applies in the customer’s member state. Monthly submissions can be made if desired.
Also, ESL’s for intra-EC supplies of goods will be required on a monthly basis where the value of such supplies has exceeded £70,000 in the current or any of the previous four quarters.
The same form (VAT 101) will be used for both types of declaration, with services being highlighted by the use of indicator code “3”.
The timeframe for submission of ESL’s will be 14 days from the end of the reporting period (21 days if submitted electronically).
Refunds of VAT from other member states
All refund claims submitted on or after 1 January 2010 will be entered through an electronic portal hosted by HMRC. Businesses will register on the portal via the Government Gateway. HMRC will be responsible for forwarding the claim to the relevant member state, which must then process the claim within 4 months (8 months if further information is required) and make payment within 10 working days of approval. Business will have 9 months (compared with 6 months currently) from the end of the calendar year to submit a claim.