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Monday
Jun222009

UK businesses urged to gear up for new EU VAT rules

The UK tax man is urging businesses to gear up for EC cross border VAT rule changes that come in to force from January 1, 2010. The new rules are expected to reduce the time it takes time to submit ESLs. Furthermore, electronic VAT refund procedures will be introduced across the EU, which should significantly reduce the time entrepreneurs spend on complex matters such as cross boarder VAT.

Affected UK businesses are:

    * Businesses supplying services to overseas businesses

    * Businesses receiving services from overseas businesses

    * Businesses supplying goods to other EC countries

    * Businesses reclaiming VAT incurred in another EC country

HM Revenue and Customs suggests that businesses should start changing accounting procedures and build a database of VAT numbers for their customers or suppliers in other EU countries to make the transition easier, according to guidance to agents released today.

Obtaining refunds of VAT paid in other EU Member States

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.

Changes to the Place of Supply Rules: From 1 January 2010, services to most business customers will be treated as supplied in the country where the business customer is established. The business customer will account for VAT under the reverse charge mechanism.

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

The changes will be phased in on 1 January 2010, 1 January 2011, 1 January 2013 and 1 January 2015.

Changes to the Time of Supply Rules: The time for accounting for reverse charge VAT will change on 1 January 2010. New UK legislation detailing the changes will be introduced later this year.

New EC Sales Lists (ESLs) for services and goods: So HMRC can check VAT is accounted for correctly by businesses receiving intra-EU supplies of services, UK VAT-registered businesses that supply services to EU businesses, where the place of supply is the customer’s country, will have to complete ESLs for each quarter. UK VAT-registered businesses that supply goods to other EU countries already submit ESLs.

 



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    The new rules are expected to reduce the time it takes time to submit ESLs. Furthermore, electronic VAT refund procedures will be introduced across the EU, which should significantly reduce the time entrepreneurs spend on complex matters such as cross boarder VAT.

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