1 January 2010 heralds the restoration of 17.5% as the standard rate of VAT. I also is the start date for the package of cross border VAT changes contained in the 2009 Finance Act.
For businesses involved in providing or purchasing international services, a review of impact of these changes on their VAT accounting is essential. Any reader of this article potentially affected by any of the matters mentioned below should seek appropriate professional advice as HMRC are still in the process of formalising the rules.
These fundamental changes will affect the rules on:
♦ place of supply of services rules;
♦ the reverse charge mechanism;
♦ time of supply of services rules;
♦ VAT refund procedures where VAT is paid in another EU member state; and
♦ the reporting requirements and deadlines for EC sales lists (ESLs).
The changes will oblige many businesses to make changes to their systems, which will add to business costs. But some businesses will be able to make welcome cost savings as a result of some of the simplifications which will be introduced. Some not for profit organisations will face a new VAT cost on cross-border purchases of services.
There is now a penalty regime in force which allows HMRC to impose substantial penalties where errors arise in VAT returns and so it is vital that proper planning is done to cope with the changes.
For more details please see the attached factsheet: Cross Border VAT Changes
For more information please contact Stephen Fox on 01225 428114 or email s.fox@robsontaylor.co.uk
Date:28 November 2009
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