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HM Revenue and Customs Brief 28/09


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Issued April 20th 2009

VAT -Reverse charge accounting for businesses trading in mobile telephones and computer chips: renewal of EU derogation

Who needs to read this?

Businesses buying and/or selling any of the following goods:

  1. Mobile telephones
  2. Integrated circuit devices, such as microprocessors and central processing units, in a state prior to integration into end user products


The reverse charge for mobile phones and computer chips was implemented with effect from 1 June 2007 to remove the opportunity for fraudsters to use these goods to perpetrate missing trader intra-community (MTIC) carousel fraud. As an exception to the normal accounting rules for VAT the UK has a derogation from EU law to apply this anti-fraud measure, which runs until 30 April 2009. The Government announced in its Pre-Budget Report 2008 that it had applied for a renewal of the derogation. The purpose of this Revenue & Customs Brief is to provide:

  1. information on renewal of the derogation
  2. guidance on the application of the reverse charge in the event that the renewal is not concluded by 30 April 2009

i) Renewal of the derogation

On 10 March 2009 the European Council of Finance Ministers (ECOFIN) agreed, in principle, to the renewal of the UK's derogation until April 2011. The Government is working with the Commission and the Member States to ensure that the legal text is adopted as soon as possible. We anticipate that it will be agreed within the next few weeks. Formal agreement to the renewal text, however, may not be concluded before 30 April, in which case there would be a short gap between the expiry of the derogation and its renewal. If there is a gap, it is expected to be temporary as we expect that the extension of the derogation will apply retrospectively from 1 May 2009 resulting in an unbroken legal vires for the reverse charge. UK law will therefore remain unchanged.

ii) Application of the reverse charge

If there is a temporary gap in the derogation, businesses that make or receive business-to-business supplies of mobile phones and/or computer chips with a value of 5,000 or more should continue to apply the reverse charge. Suppliers should also continue to complete and submit Reverse Charge Sales lists for these supplies. Businesses that apply the reverse charge and comply with UK law will not be subject to any penalties as a consequence of any temporary gap in the EU derogation. If a business does not apply the reverse charge during any temporary gap in the derogation, it may be liable to pay to HM Revenue & Customs (HMRC) any tax lost or to have its input tax denied.

Further Information

For further information on the reverse charge for mobile phones and computer chips please see Public Notice 735: VAT Reverse charge for mobile phones and computer chips.

About the Author

Crown Copyright 2009.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2009-04-22 01:27:11 in Tax Articles

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