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All Change Again for VAT on broadcasting telecoms and electronically services


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21st November 2013

The VAT rules relating to the place of supply of services have undergone a number of changes since the EC wide 'simplification' to the place of supply rules in 2010. In the case of broadcasting, telecoms and electronic services it is all change again from 1 January 2015. Given the massive rise in e commerce these changes are likely to affect a significant amount of businesses both large and small. As the bigger businesses involved in broadcasting, telecoms and electronically supplied services often have in house VAT advice it is likely that smaller businesses will be more open to attack by HMRC if they have not understood the rule changes correctly and taken action to account for transactions correctly

The supply of broadcasting, telecoms and electronically supplied services post 31 December 2014 will become VATable where the consumer of the services is located. This is a change from the current position where VAT is due where the business is established, subject to the use and enjoyment provisions. The use and enjoyment provisions in themselves create problems as it can be difficult to establish where a supply is used and enjoyed especially given that in some cases the supply may be made via businesses outside the EC with the end consumer being based in an EC country.

The rule change means that businesses supplies of broadcasting, telecoms and e services would potentially have to register in each and every EC member state where the business supplied consumers. In order to avoid this complication businesses have been given the option of registering to account for VAT on affected supplies via a one stop shop in the EC country where they are established or if they are non EC businesses in an EC country of their choice. This will allow the business to make a single VAT return in one EC country to account for supplies made in the return period to consumers in each member state at the applicable rate for the country where the supply was consumed. Businesses that are already UK VAT registered have the option to register for the one stop shop and account for VAT via a single MOSS VAT return submitted to HMRC.

This apparent simplification will, as is always the way with VAT simplifications, create additional complications for businesses. This is due to the fact that the nature of the service supplied makes it very hard to determine the nature of the customer and where the supply is consumed. For example a business that supplies electronic services and is paid via SagePay or Paypal might not be able to determine if the supply is made to the consumer's home pc in one country with VAT due at the rate applicable in that country or an internet café in another country with a different VAT rate.

There is little guidance available as yet to explain what proof suppliers should keep to support their VAT accounting decisions. Given that this leaves suppliers open to challenge by HMRC if the suppliers decision making process and evidence to support why VAT has been accounted for at a rate applicable in one country and not another is challenged by the department, it is recommended that affected businesses seek VAT advice now on measures to be taken to protect themselves from a VAT dispute with HMRC. In addition suppliers who are already making supplies that are subject to the use and enjoyment provisions should seek advice as HMRC are increasingly challenging businesses that make supplies to non EC based businesses where theie is a chain of transactions that are ultimately consumed by individuals in the UK.

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-12-27 15:23:15 in Tax Articles

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