Technical Briefings
10 November 2009
VAT changes 1 January – are you ready?
Some major changes to VAT come into effect from 1 January 2010 in relation to place of supply and time of supply of cross-border B2B services. In order to ensure that your procedures, practices and software can cope with these, you will need to be taking action now.
Changes will come into force on 1 January 2010 which will affect the following key areas:
- the basic place of supply of cross border services to be moved,
- a wider base of services liable to the reverse charge – including supplies received for non-business purposes,
- the reporting of intra-EU goods and services on EC Sales Lists,
- time of supply for reverse charge to be when service is completed, not when the supply is paid for,
- for continuous supplies of services with no invoicing cycle, a default cut-off and deemed supply on 31 December each year,
- changes to procedures for reclaiming VAT suffered in other EU countries
Where is the place of supply?
From 1 January 2010, the basic place of supply for services to businesses will be deemed to be the place where the recipient is resident. So, for basic services supplied to a business client who belongs elsewhere in the EU, you will not have to charge UK VAT.
Conversely of course if you receive services from EU resident business you will need to reverse charge yourself VAT.
There are many services which have exceptions to this basic rule. These include, services relating to land; cultural, artistic, sporting, scientific, educational, entertainment and similar services; short term hire of transport; catering services.
There are a number of changes to the place of supply of some of these services, notably in relation to transport of goods and the supply of means of transport. Some terminologies have been changed, without any major impact on the rules themselves. Further changes can be expected in later years.
Also note that the place of supply for services to non-business EU customers remains as where the supplier belongs.
What is new for EC Sales Lists?
Those who supply services to customers in other member states will need to report this on a quarterly EC Sales List, including the VAT number of the customer concerned. This means that you will need to ensure that you have the VAT numbers for each customer and that procedures are in place to start capturing information to make these returns.
Cross-border VAT refunds
The new procedures for cross-border VAT refunds within the EC promise to make life a little easier for those expecting refunds from 1 January 2010 onwards.
UK businesses will be able to submit repayment claims electronically via a UK portal, and these claims must be dealt with within four months – even if to request more information, in which case the time limit can be increased up to a maximum of eight months.