New VAT procedures in force
If you are a VAT registered business in the UK, or if you provide or receive goods or services to/ from the UK, we advise that you read this VATflash as a matter of urgency.
As you will remember from past VAT Updates, it has been the European Commission’s (EC) long?term plan to simplify complex EU VAT rules. As of 1st January 2010, several changes to VAT reporting obligations came into force and other changes are due shortly.
The key changes:
• EC Sales Lists for goods are moving to monthly filing
• A new requirement to file EC Sales Lists for services introduced
• Easier to reclaim other countries’ VAT.
If you are the owner of a UK business (whether registered for VAT or not), and provide goods or services to business customers in other EU member states, receive services from anywhere outside the UK, or incur VAT in other EU member states, it is very important that you consider the impact of these changes.
Implications of the VAT changes
Many of the new procedures are now in force. In order to comply with these new reporting obligations you may need to make major and immediate changes to your VAT administration and filing procedures, undertake additional recordkeeping and possibly make significant changes to your accounting systems
Cross-border goods or services - EC Sales Lists
1. Previously, all UK VAT registered businesses that supplied goods to customers registered for VAT in other EU member states were required to file quarterly EC Sales Lists within 42 days following the quarter-end. Where the value of your EU sales exceeds £70,000 in the current or any of the past four quarters, you must now file EC Sales Lists on a monthly basis.
2. Also with effect from 1st January 2010, EC Sales Lists will now need to be filed for EU cross?border services, imposing a significant additional burden on your business administration. This will impact upon all UK businesses providing services to business customers in other EU member states.
3. The filing deadlines have also been tightened up and daily penalties have been introduced by HMRC for businesses that do not comply. EC Sales Lists must now be filed electronically no more than 21 days after the end of each quarter - or month, as the case may be - for those filing electronically, or 14 days for those still filing paper returns. If your business is affected you must ensure you make any necessary changes to your accounting systems immediately in order to produce the data needed to compile and file EC Sales Lists by the relevant deadlines.
4. EC Sales Lists for goods and/ or services are only required to report a sale where the customer is registered for VAT in their own EU member state. However, the rules for whether or not you charge UK VAT on your sales invoice are different. For example:
• if you are selling goods to a customer in another EU member state and they are not registered for VAT in the EU, you must charge UK VAT;
• however, if you are providing services then you are still able to issue a VAT-free invoice, as long as your customer is in business, even if they are not registered for VAT.
Immediate action required
Your immediate priorities should therefore be to:
? make the necessary changes to your accounting systems in order to report the data by the much tighter filing deadlines; and
? collect the VAT registration numbers of your EU business customers if you have not done so already.
Reclaiming EU VAT
The current hard?copy process for reclaiming VAT incurred in another EU member state was recognised as inefficient and time?consuming, both to make the claims and for the local tax authority to process them.
As of 1st January 2010, a new online VAT refund procedure came into effect across the EU for all claims submitted after this date. We believe that the electronic system will allow supporting documents to be uploaded in electronic form, however, it is important to bear in mind that other member state tax authorities may still require the original documents. As part of this new procedure, the deadline for submitting EU refund claims has been extended from the previous six months to nine months after the calendar year-end.
Importantly, the new online claim procedure can be used for claims submitted before 30th September 2010 for VAT incurred in the calendar year 2009.
There are further changes being phased in over the next few years affecting individual business sectors, which we shall advise you of in due course.
As would be expected, there is a great deal of detail underpinning this brief summary of the VAT changes, so if you think that you are affected, please contact our VAT department or your usual UHY contact for further information.
Published on 5 March 2010