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UK's HMRC Implements EU VAT Directive Amendments

by Robert Lee, Tax-News.com, London

30 December 2008


HMRC announced on December 22 that it will take the first steps in implementing amendments to the EU VAT Directive, adopted at an ECOFIN meeting in February 2008, into UK law. The directive, 2008/08/EC, addresses rules applying to VAT for trade between EU countries.

From January 1, 2010, the new basic rule for the place of supply of services will tax Business-to-Business (B2B) supplies of services at the place where the customer is established and no longer at the place where the supplier is established, as is currently the case.

For Business-to-Consumer (B2C) supplies of services, the general rule for the place of supply will continue to be the place where the supplier is established. However, from January 1, 2015, the place of supply of intra-EC B2C supplies of telecoms, electronically supplied services and broadcasting will be where the customer is established or usually resides. The Commission will report on the feasibility of the new B2C rules before entry into force.

As now, there will be exceptions to the general rule for certain services, with a view to achieving taxation in the place of consumption. In the main these will be implemented on January 1 2010, with further changes to the ‘where performed’ rule from January 1, 2011 and for long-term hire of means of transport from January 1, 2013.

Currently EC Sales Lists are only required for intra-EC supplies of goods. From January 1 2010, EC Sales Lists will also need to be completed for intra-EC taxable supplies of services which are subject to reverse charge arrangements in the customer’s Member State. They will not be required for intra-EC supplies of services, which are exempt in the customer’s Member State.

From January 1, 2015, businesses making intra-EC cross border B2C supplies of telecoms, broadcasting and electronically supplied services will be required to account for VAT due in the Member State where the customer belongs. They can do this either by registering for VAT in their customers’ Member State or opting to account for VAT on these supplies via the One Stop Scheme (OSS).

The OSS will be optional for businesses. It will enable businesses making such supplies in a number of Member States (as a result of the changes to the place of supply rules) to register and declare VAT due on those supplies throughout the EC via a single Member State. The OSS will be based on the existing special scheme for non-EC businesses making B2C supplies of electronically supplied services (which will itself be extended from 2015 to include telecommunications and broadcasting services).

The OSS will only cover B2C supplies of telecoms, broadcasting and electronically supplied services. Normal registration and accounting rules will apply in relation to supplies of goods and other services.

The EC VAT Package, adopted on February 12, 2008 after many months of negotiations amongst ECOFIN members, will modernize and simplify the rules relating to cross-border supplies of services and recovery of input tax. The changes are now open for debate, and will come into effect in national legislation between January 1, 2010 and January 1, 2015.


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