A new EU directive has been adopted which will mean that from
1 January 2010, there will be new VAT rules relating to the supply
of services across the EU. Instead of the current basic rule that
the place of supply of services is treated as being where the
supplier is established, the place of supply for most services
will shift to the country where the customer is established.
What does this mean and why should you care?
For the vast majority of cross-border B2B transactions, there
will be no VAT charged on the invoice.
That should simplify things but reporting will get more complicated.
Imports: businesses buying services from overseas
Basically, in most cases, a UK business that buys services from
a supplier in another EU country will have account for UK VAT
under what is known as the ‘reverse charge’ provisions.
This means that the recipient will need to charge itself VAT
on the value of services received.
What? Charge yourself VAT?
Ok, the reality is that no money actually changes hands. You
simply enter the VAT payable in box 2 of the VAT form and, as
long as it’s fully claimable, you also add it to the VAT
on purchases in box 4. Net result: no money changes hands.
Exports: businesses selling services overseas
UK businesses that supply services to customers in other EU
countries will need to obtain the customer’s VAT registration
number and show it on the invoice, They will also have additional
quarterly reporting obligations (this is already the case for
goods).
It is essential that affected businesses have systems in place
before the commencement of the new rules to ensure they are able
to comply with these additional requirements and to avoid penalties.
New refund procedure for VAT incurred in other EU countries
A new electronic VAT refund procedure will be introduced across
the EU for all claims submitted after 1 January 2010 to replace
the current paper-based system. Businesses established in the
UK will submit claims for VAT incurred in other EU countries on
a standardised form through the UK Government Gateway, rather
than direct to the Member State of Refund as at present.
Please contact us on 0845 652 5220 about your specific circumstances
or use our contact form.
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