If your business model is based on the supply of services rather than goods, this is likely to affect how you pay VAT in various ways. As such, it is important for your business to stay aware of any changes to VAT regulations to ensure you remain compliant at all times.
For businesses involved in making wholesale supplies of certain electronic communications services, the rules around paying VAT were amended in 2016 to introduce a new reverse charge measure as a means of combating fraud. If your organisation is involved in this sector, it is essential to pay attention to how this legal change works.
How is the reverse charge applied?
Implemented on February 1st 2016, the rule means that the customer is liable to account for VAT, rather than the supplier.
This reverse charge applies to the services of routing telephone calls and associated data - including text and images - over landlines, mobile networks or the internet. It does not apply to non-wholesale supplies, or to businesses not registered or not liable to be registered for VAT.
This anti-fraud measure was introduced in order to deny unscrupulous operators the opportunity to charge for VAT, and then go missing before paying it over to the Exchequer, a crime known as Missing Trader Intra-Community (MTIC) fraud.
How should businesses account for charges like this?
This rule is applicable to several hundred businesses across the UK, and requires these organisations to account for the charge in their invoicing and VAT accounting structure. Companies operating in this sector need to keep themselves updated on changes of this kind to make sure their VAT processes are always in line with the latest legislation.
Now that the UK has left the EU, British businesses are likely to see more changes to VAT rules and procedures in the coming years, which is why it is particularly advisable to take a proactive approach to monitoring any incoming reforms.
If you are involved in the supply of electronic communication services and are looking for expert advice on how best to stay compliant with the latest VAT rules, speak to one of our consultants by calling our free VAT helpline on 0333 3638 012.
Latest Case Studies
Watch Our Videos
Get the vital information you need quickly and easily by watching one of our guidance videos - topics include VAT assessments and penalties, VAT for charities, and maximising VAT recovery.