New Rules For Services Supplied To Other EU Countries And New Reporting Requirements
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Published 25th January 2010
From 1 January 2010 there are new rules coming into force for the place of
supply of services, new reporting requirements for EC Sales Lists (‘ESL’s’) and
a simplified method for reclaiming VAT incurred in other EU Member States.
Up to 1 January 2010 the basic rules for the place of supply of services was
that they were supplied in the country where the supplier belonged. From 1
January 2010 the basic rule for business to business supplies of services is
that they are supplied where the customer belongs and is subject to the ‘reverse
charge’ by the customer.
The reverse charge is a simplification measure designed to avoid overseas
businesses needing to register in a Member State when it is possible for the
customer to account for the VAT on a supply. On the UK VAT return you would
charge yourself VAT on the purchase of the service and show it in box 1 of the
VAT return and reclaim it box 4, the net effect being nil.
The following changes to ESLs apply from 1.1.10 and cover businesses
supplying services to businesses in other EU Member States: • ESLs relating to
services may be submitted quarterly, on a calendar quarter basis showing
indicator 3 to signify services . • ESLs relating to goods may also be submitted
on calendar quarters, provided that the VAT-exclusive value of supplies of goods
to other Member States has not exceeded £70,000 in any of the previous 4
quarters. This change’s to £35,000 per quarter from 1 January 2012. • If a
business exceeds the quarterly goods threshold an ESL must be submitted at the
end of that month, covering the month or months in that quarter. ESLs must be
submitted monthly thereafter. • Once a business is on a monthly cycle it must
continue to submit monthly ESLs for goods until the value of its intra-Community
trade in goods has been below the threshold for 5 consecutive quarters – it may
then revert to quarterly submission. • A business required to submit monthly
ESLs relating to goods, may still submit ESLs relating to services quarterly. •
The time limit for submitting returns has been changed to 14 days from the end
of the month for paper returns extended to 21 days for electronic submission of
ESLs. A new electronic cross-border refund system will go live across the EU
from 1 January 2010.
The cross-border refund system enables a business that incurs VAT in another
Member State to recover it directly from that Member State (the Member State of
Refund - MSR). The current system, known as the 8th Directive refund system, is
a lengthy, burdensome, paper-based system.
Under the new electronic system:
• The claim will be sent to the MSR, via the business’s own tax authority
thus eliminating the need for a VAT 66. • The format of the claim is simplified,
introducing the use of standard fields for information and coding purposes. This
user friendly approach will reduce the number of issues due to language
problems.
From 1 January 2010, claimants will have nine months (rather than the current
six months) in which to submit claims for VAT in the preceding calendar year.
The claim must normally be processed within four months and, if approved,
repaid within ten working days. If further information is required the
processing time can be extended to eight months. If these time limits are
exceeded interest will be paid.
The following de minimis limits will apply to claims:
• For periods of less than one year but not less than three months, it must
be for at least EUR 400.
• If the claim relates to a whole year or the remainder of a year, it must be
for at least EUR 50.
There will be a maximum of five claims that can be submitted to each MSR per
year - essentially one per quarter, plus a final ‘sweep-up’ claim to capture any
invoices not previously claimed during that year.
Details of these changes can be found at:
http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm
Andrew Needham is a Director of VAT Specialists Limited,
headed by Chartered Tax Adviser Andrew Needham who has a degree in Law from UCNW
Bangor and is a specialist in indirect taxes. Andrew has over 20 years
experience in VAT having spent 7 years in HM Customs & Excise, firstly as a VAT
inspector, then as a departmental trainer, and finally in a headquarters policy
unit dealing with the introduction of the EU single market.
VAT Specialists Limited, 31 Bisham Park, Runcorn, Cheshire WA7 1XH.
(E) Andrew Needham BA CTA
(T) 01928 571207
(F) 01928 571202
(M) 07810 433 926
(W) www.vatspecialists.net
