New VAT Regulations 

There are some important changes to VAT which will come into effect in 2010.

 

 

From 1 January 2010 the standard rate of VAT will return to 17.5%. You will therefore need to apply this rate on all sales of standard rated goods and services taking place on or after 1 January 2010.

 

This includes all takings received and all VAT invoices issued to other VAT registered businesses on or after 1 January 2010.

 

There are a few exceptions to the rule including for goods taken away or services provided before 1 January that you invoiced after the rate change. There are also special rules for services beginning before 1 January but completed after this date. For further advice please contact us.

 

 

As part of a Europe wide agreement from 1 January 2010 proposed changes to the VAT supply of services rule will come into effect for when the supply of service is made to a business outside the UK.

 

Current Rules:

Under current rules, for most supplies of services, the place of supply is decided by what is known as the basic rule. The basic rule is that if you supply services (apart from those covered by special rules) then the place of supply is the place where you, the supplier, belong.

 

Current basic rule services include management services (with the exception of accountancy, consultancy or legal services), clerical and secretarial services, provision of office facilities (but not the accommodation itself), archiving services and subscription services etc.

 

New Rules:

The basic rule for the place of supply is changing from 1 January 2010, along with other changes to the VAT rules for international transactions.

 

From that date, the place of supply will be the place where your business customer is established, and the business customer will account for VAT under the reverse charge mechanism in their country.

 

Services provided to non-business customers will still generally be liable to VAT in the country of the supplier.

 

The following will also be treated as basic rule services, where previously they were exceptions to it:

- The transport of goods e.g road haulage including ancillary transport services.

- Services in relation to valuation and work on goods.

- The service of intermediaries e.g someone facilitating a supply between two parties.

 

Other areas affected include new rules on the hire of a means of transport. No decision has yet been made on whether travel agents or hotel booking is treated as a land related service or a basic rule service.

 

 

EC Sales Lists (ECSL) are currently only completed for goods, but from 1 January 2010 a new EC Sales List will need to be completed for reverse charge services. This will mean there will be an ESCL for both goods and services from 1 January 2010.

 

The reverse charge should be declared on UK VAT Returns when the same services are received from EC suppliers.

 

ESCL for services will be completed quarterly and will need to include each customer to whom a supply has been made and the total supplies to that customer (excluding VAT). So now is the time to start to record the EC VAT numbers for any customers you may have.

 

This is one of the most complex areas of VAT so you should seek advice now before the changes are implemented.

 

 

All VAT registered businesses with a turnover in excess of £100k (VAT exclusive) in the year ending on or after 31 December 2009 must file VAT Returns online and pay any VAT due electronically with effect from the Return covering the period beginning on or after 1 April 2010.  

 

All businesses that apply for VAT registration from 1 April 2010 will also need to file Returns electronially regardless of their turnover.

 

Further information will be released by HMRC nearer the time but should you have any questions or concerns please let us know.