2010: A VAT Odyssey

[Kevin Hall]

Is everyone up to speed with the vast quantity of VAT changes for 2010?

Sole traders? Finance departments in large companies? Even accountants and lawyers who complete VAT returns for their clients?

Most have heard of the change in Place of Supply of B2B services supplied to overseas customers (or purchased from overseas suppliers), and the "new" Reverse Charge mechanism.

This "Reverse Charge" was largely in place already and has simply been extended a little. A bigger change is to the recording of these transactions.

There will now be a sudden need to complete EC Sales Lists for services. Even the deadline for EC Sales Lists for sales of goods to overseas EC customers (which have always been required anyway) will now be reduced from 6 weeks to 2 weeks after the month-end (or 3 weeks if you complete it online).

Furthermore, only certain Reverse Charged services should be declared on the EC Sales Lists. Those which are Reverse Charged in an option outside the new "General Rule" should be excluded.

But there are other new oddities too.

Invoice dates can no longer be relied on for the "Tax Point" or Time of Supply. Your EC Sales List records must match the overseas VAT returns of your customer and invoice dates were not deemed sufficiently reliable. HMRC was fighting this, but to date I have seen no final result.

All but the smallest businesses will have to submit and pay VAT returns online (despite how much more difficult this is than simply completing and posting a paper VAT return).

Those who import or export goods should also have an EORI number instead of a TURN, to identify yourselves to Customs.

Even the more complex mechanisms are changing: if you incur VAT in another country (e.g. hotels, conferences, fuel, etc.), you can reclaim this via HMRC now - though in reality HMRC will merely pass on your claim to the other EC country. Many countries might not be ready on time for this change, so keep watching for changes!

Finally of course there is the good old VAT rate increase. Guaranteed by the government to increase to 17.5% on 1 January 2009 (at 6:00am if you're running a pub, nightclub, etc.), it could well increase again after any General Election - so make sure your records systems are flexible enough to cater for VAT rate changes.

Many cross-border businesses have taken early advice and prepared well for these changes. If you are concerned that your clients might need to do so before the end of the year, now is the time to start asking questions.

Hope it helps?

[elainec100@cheapaccounting]

I hate vat (and Steve our vat expert knows this!) - I actually think it is one of the most complex areas of all taxes, with the shortest reporting and payment time scales.

So many mistakes happen in this area and to make it more complex is just plain stupid IMO.

[Tej]

Finally of course there is the good old VAT rate increase. Guaranteed by the government to increase to 17.5% on 1 January 2009 (at 6:00am if you're running a pub, nightclub, etc.), it could well increase again after any General Election - so make sure your records systems are flexible enough to cater for VAT rate changes.



I think that should be 1 January 2010!!!

[dabbler]

Furthermore, only certain Reverse Charged services should be declared on the EC Sales Lists. Those which are Reverse Charged in an option outside the new "General Rule" should be excluded.

I've been trying to get my head round this aspect of it. We sell electronically-supplied services for which the place of supply is the customer's location. We obtain a VAT ID from them if they have it and verify it via the EU VIES website. However, from Jan 2010 we will have to supply this information via the EC Sales List. What I'm confused about is what do we do:

1) when the customer is not VAT registered but is a business, and

2) when they give us a VAT number that shows up as invalid on the VIES website.

For 1) I am thinking that I just leave them off the EC Sales list but still don't charge them VAT. For 2) I am guessing that I will have to go back to the customer to get a valid VAT ID or charge them VAT. Can anyone help with these questions?

Sarah

[Zeno]

What I find interesting about VAT is how important it is to SMEs to get right, but how little prominence it is given by the major accounting/taxation institutes.

The trouble is that the complicated areas for corportation tax are not usually experienced by the SME but they are subjected to complex VAT from the word go.

Added to the fact that HMRC gives a strong impression to the average trader that VAT is simple with the help of their leaflets and they should be able to do it themselves. Any problems, phone our useless helpline and we will tell you to read whatever leaflet you started off the phonecall quoting.

A more suspicious person than me would think they did it deliberately so the can collect penalties/surcharges.

[Kevin Hall]

I've been trying to get my head round this aspect of it. We sell electronically-supplied services for which the place of supply is the customer's location. We obtain a VAT ID from them if they have it and verify it via the EU VIES website. However, from Jan 2010 we will have to supply this information via the EC Sales List. What I'm confused about is what do we do:

1) when the customer is not VAT registered but is a business, and

2) when they give us a VAT number that shows up as invalid on the VIES website.

For 1) I am thinking that I just leave them off the EC Sales list but still don't charge them VAT. For 2) I am guessing that I will have to go back to the customer to get a valid VAT ID or charge them VAT. Can anyone help with these questions?

Sarah

Hi Sarah

EC VAT law defines "taxable person" at Article 9(1) as follows.


‘Taxable person’ shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

The new "General Rule" at Article 44 then states the following.

The place of supply of services to a taxable person acting as such shall be the place where that person has established his business.


So the conclusion I draw, personally speaking, is that services supplied to a company or person which carries on an economic activity (e.g. a business) are supplied where the business customer is located, whether or not they are registered for VAT there.

Article 196 then states that the customer must be responsible for paying any VAT on that transaction, in their own country.


VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.


There are exceptions to the new "General Rule", which are entitled "Particular Provisions". Some of these exceptions do refer to electronically-supplied services (examples are given in Annex II of the EC VAT law, so be sure your supplies qualify as such), but always to supplies made to "non-taxable persons". In other words, if your customer is not conducting an economic activity (e.g. a business), but is instead just a private individual or a "holding company", then these exceptions will apply. So you should hold documentary evidence that your customer is "in business".


Of course, if your customer is not an economic operator of any kind (e.g. "in business") and is a "non-taxable person", then you will need to revisit the issue.

As for the EC Sales List rules, I believe HMRC have already stated that those customers without VAT registration numbers, to whom qualifying Reverse Charged sales are made, should indeed simply be omitted. But I stand to be corrected if HMRC have changed their minds on this recently ...


Hope it helps?

[RAL]

Kevin

Welcome back!:)

Regards

[RAL]

Those who import or export goods should also have an EORI number instead of a TURN, to identify yourselves to Customs.



Hi Kevin

How does this would affect someone who uses bonded warehouse for importing goods?

rgds

[dabbler]

Kevin, thank you for your reply.

There are exceptions to the new "General Rule", which are entitled "Particular Provisions". Some of these exceptions do refer to electronically-supplied services (examples are given in Annex II of the EC VAT law, so be sure your supplies qualify as such), but always to supplies made to "non-taxable persons".

Where can I read this Annex II and the other articles of EC VAT law you refer to? I have searched on google and cannot find it, but I'm probably not searching for the right thing.

Sarah

[Kevin Hall]

Hi Kevin

How does this would affect someone who uses bonded warehouse for importing goods?

rgds

If the warehouse is a "pre-importation" location, where goods are held prior tothe payment of import liabilities (such as Import Duty & Import VAT), then it will certainly depend on who conducts the importation.

In essence, the EORI is required to identify whoever pays the Import liabilities. This might be you, or it might be your customer.

I am not an import specialist, so whether you would benefit from an EORI when trying to take advantage of a Customs Warehouse arrangement, I could not say.

Do you have a specific case in mind, RAL?

[wood1e2]

"There will now be a sudden need to complete EC Sales Lists for services"

What services? Has anyone got a list? There are obviously changes coming, but originally it was just micro-chips and phones?

Actually can someone post a link with simple explanation?

As we provide a service in Spain to predomintly businesses but some private/self eomplyed people....we are UK based...

[Kevin Hall]

Kevin, thank you for your reply.



Where can I read this Annex II and the other articles of EC VAT law you refer to? I have searched on google and cannot find it, but I'm probably not searching for the right thing.

Sarah

Hi Sarah

The law is hidden away in the EC's own website: http://europa.eu/ Annex II states the following.

INDICATIVE LIST OF THE ELECTRONICALLY SUPPLIED SERVICES REFERRED TO IN ARTICLE 58 AND POINT (K) OF THE FIRST PARAGRAPH OF ARTICLE 59
(1) Website supply, web-hosting, distance maintenance of programmes and equipment;
(2) supply of software and updating thereof;
(3) supply of images, text and information and making available of databases;
(4) supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events;
(5) supply of distance teaching.

Hope it helps?

[Kevin Hall]

"There will now be a sudden need to complete EC Sales Lists for services"

What services? Has anyone got a list? There are obviously changes coming, but originally it was just micro-chips and phones?

Actually can someone post a link with simple explanation?

As we provide a service in Spain to predomintly businesses but some private/self eomplyed people....we are UK based...

Hello Mr e2

The idea is that all B2B services supplied cross-border within the EC will be "Reverse Charged" and listed on the EC Sales Lists. There are several pages of exceptions in the EC VAT law. The usual example given is for land-related services, which will continue to be taxed for VAT in the conutry where the real estate is located. But there are also others.

The key with resolving VAT issues is always to identify the precise nature of the supply being made. So we would need more details from you on this point.

[Kevin Hall]

I hate vat (and Steve our vat expert knows this!) - I actually think it is one of the most complex areas of all taxes, with the shortest reporting and payment time scales.

So many mistakes happen in this area and to make it more complex is just plain stupid IMO.

Yes, I remember how much you and Jenni both loved VAT ;)

It is indeed a complex area; and relatively small businesses are almost immediately involved in the complexities of VAT. Yet most simply cannot afford to pay the high VAT fees (of my more expensive peers) to help them get it right from the start, especially with the economy teetering on the economic brink still! So errors will doubtless be found in 4 years' time and perhaps penalised ...

[elainec100@cheapaccounting]

Yes, I remember how much you and Jenni both loved VAT ;)

It is indeed a complex area; and relatively small businesses are almost immediately involved in the complexities of VAT. Yet most simply cannot afford to pay the high VAT fees (of my more expensive peers) to help them get it right from the start, especially with the economy teetering on the economic brink still! So errors will doubtless be found in 4 years' time and perhaps penalised ...

yet another area where the government makes it hard (impossible) for small businesses.

When will they learn.

There are over 5 million businesses in the UK and SMEs make up 99.9% of this figure (source: national stats office).

How come we don't have 99.9% of the voice and representation on such matters. :rolleyes:

[Kevin Hall]

yet another area where the government makes it hard (impossible) for small businesses.

When will they learn.

There are over 5 million businesses in the UK and SMEs make up 99.9% of this figure (source: national stats office).

How come we don't have 99.9% of the voice and representation on such matters. :rolleyes:

I suspect it's one tax pound paid = one representational voice?

[elainec100@cheapaccounting]

I suspect it's one tax pound paid = one representational voice?


Let's change that to one hour spent collecting HMRC taxes on their behalf = 1 vote :D:D

or 1 hour spent by frustrated accountant sorting out yet another HMRC cock up by badly trained staff during their office close down (I mean rationalisation) programme = 1 vote

:rolleyes::rolleyes:

[Kevin Hall]

Let's change that to one hour spent collecting HMRC taxes on their behalf = 1 vote :D:D

or 1 hour spent by frustrated accountant sorting out yet another HMRC cock up by badly trained staff during their office close down (I mean rationalisation) programme = 1 vote

:rolleyes::rolleyes:

I think I might be with you on that. I had to train a poor guy on the HMRC Helpline last week on how VAT applies to yachts now, before asking whether I correctly understood the change for 2010. So: see you outside No. 10? :D

Meanwhile, these erstwhile and down-trodden traders have to play the hand they've been dealt by the European Council of Finance Ministers - let's see if they are all happily prepared for the VAT adventure ahead of us ...

[elainec100@cheapaccounting]

Meanwhile, these erstwhile and down-trodden traders

I would lay a bet that the majority are not even aware of any changes ahead :rolleyes:

[Jenni384]

Yes, I remember how much you and Jenni both loved VAT ;)


I remember as a naive trainee how I once thought I might enjoy and specialise in VAT.....

... Now I just appreciate your informative posts and refer to specialists when I need to :D

Thanks Kevin :)

[elainec100@cheapaccounting]

I remember as a naive trainee how I once thought I might enjoy and specialise in VAT.....

... Now I just appreciate your informative posts and refer to specialists when I need to :D

Thanks Kevin :)

the only vat I enjoy is that with booze in :D:eek::redface:

[Kevin Hall]

In which case, Elaine, you will need to know that the VAT rate on booze in pubs will only go up 2.5% at 6am on 1 January 2010: no need to scramble for a refill before midnight! :p

[weebly_one]

So another quick question on this theme.

I have a friend who runs his own limited company, but is contracted to work for a company in Dublin every other week. He is invoicing them from his own company, and does the work at their offices in Dublin. He is VAT registered. (he spends one week in Dublin, then the next in UK workin for a different company)

1) Does he charge VAT on his invioces (which have to be in Euro)

2) If he does (he has their VAT number) does he include the services on an EU sales list from 1st January?

[Kevin Hall]

Hi Alison

The answers, as always in VAT, depend on precisely what kind of services are being supplied.

What does your friend do for the Dublin company exactly?

[weebly_one]

Hi Alison

The answers, as always in VAT, depend on precisely what kind of services are being supplied.

What does your friend do for the Dublin company exactly?

He is an IT contractor - but I have no idea who the Dublin company are or what they do.

[Kevin Hall]

Hi Alison

Unfortunately, VAT categories are more precise than "IT contractor". But on the assumption that the UK company is providing some sort of IT consultancy service to the Irish VAT registered company, I would usually be expecting:

1. That the UK company charges no VAT on its sales invoices to the irish VAT registered company. However, the sales invoices should be clear on the nature of the consultancy services supplied, should quote the customer's Irish VAT registration number and must make reference to the faact that the supply is "Reverse Charged".

2. That the UK company, from 2010, must complete and submit EC Sales Lists recording the sales of consultancy services to the Irish VAT registered company.

But as I say, there really is not enough detail in the scenario to be able to give a reliable answer. The IT contractor might well fall into another VAT category, with different VAT consequences.

For example, the IT work might not be consultancy in nature, so this would have to be pinned down - maybe with his accountant, a VAT specialist, or even with HMRC itself (though I understand they are backlogged with enquiries at present).

Hope it helps?

[markmclaren]

Looks like we'll have to produce a new version of our accounting software!

By the way, the HMRC summary of the 2010 VAT changes are available here:
http://www.hmrc.gov.uk/VAT/cross-border-changes-2010.htm

[Kevin Hall]

Hi Mark.

Your link is all well and good up to a point. The reason I didn't refer to it is because, in my opinion, it produces a lot of text (you have to read all that page, then read all the much longer documents linked in to it) without it giving you the final answers you're likely to need if you do supply B2B services internationally to EC business customers.

For instance, click through to the EC Sales List guidance: http://www.hmrc.gov.uk/VAT/ec-sales-lists.pdf. Then look at bullet-point two of Paragraph 5. After several days of wading through HMRC's guidance, trying to figure out exactly what HMRC are driving at, you finally end up with a reference to a European VAT law as being those services you should NOT include on the new EC Sales Lists for services. At that point you're left trying to find either (i) the law itself, which cross-reference itself like a spider's web, or (ii) a specialist like me who has studied the changes from when they were a twinkle in ECOFIN's eye (the decision to change was made in 2007, but the discussions go back years before that!).

Similarly when you click through to the Place of Supply guidance: http://www.hmrc.gov.uk/VAT/place-supply-services.pdf. Look at bullet-point one of paragraph 3.1.2, which again refers you to a European VAT law (though referring to it by a different name this time, just to add to the confusion!). And is the distonction between paragraphs 3.1.5 & 3.1.6 clear?

Remember, this is all after you have spent much precious time examining all the foregoing text.

As I say, this will take more inward-digestion than might at first appear to be the case. Given that we only have a month to 2010 (assuming no-one wants to spend Christmas examining the minutiae of VAT law), now is the time to be asking questions.

[UKSBD]

2. That the UK company, from 2010, must complete and submit EC Sales Lists recording the sales of consultancy services to the Irish VAT registered company.


Is there a set template for an EC Sales List.
From Jnuary 1st I will be supplying a monthly service to a EC member
State (invoiced monthy)
Will I have to send something to HMRC monthly (list will only have i
thing on it), do I submit with VAT return, do I submit annualy?

[Kevin Hall]

Is there a set template for an EC Sales List.
From Jnuary 1st I will be supplying a monthly service to a EC member
State (invoiced monthy)
Will I have to send something to HMRC monthly (list will only have i
thing on it), do I submit with VAT return, do I submit annualy?

It sounds like you might well have to submit EC Sales Lists to HMRC for such supplies in 2010. As to whether the old EC Sales List limits apply (£11k for qualifying supplies of goods), this would need further research on my part.

As for the rest of your queries: HMRC's last word on this subject was that the EC Sales List form itself is not changing. For services, you can submit quarterly (only for goods is a monthly EC Sales List ever required).

But you might want to have someone take you through what you need to do. For instance, there is a new code to quote. There is a new - far shorter - deadline (which is earlier than any VAT return, but varies depending on whether you have figured out how to register for online EC Sales Lists or not). Furthermore, your sales invoice date cannot be relied on to determine the period in which your sale falls.

Also, don't be fooled by HMRC saying you have no need to submit nil EC Sales Lists as (although technically true) HMRC have confirmed to us that they will issue penalties if you fail to submit a nil EC Sales List online.

Finally, you will need to know whether or not your services are qualifying services. This will depend wholly on the precise details of the supply you make.

Hopefully, advising you on all the above is little more than an hour's work for a VAT specialist, once we have all the relevant details and documentation before us. But it really is more than a UKBF posting can reliably advise on.

Hope it helps a little?

[dabbler]

Kevin,

Going back to something you said in an earlier post:

Only certain Reverse Charged services should be declared on the EC Sales Lists. Those which are Reverse Charged in an option outside the new "General Rule" should be excluded.

There has been discussion of electronic services as listed in Annex II. The services that we provide definitely fall under this category. Does this mean we do NOT have to complete the EC sales list for these services, or does it mean that we DO have to complete it - for sales to businesses, of course. My head is spinning.

Also, what is a "non-taxable person"? Is that someone who is NOT in business?

Thanks for all your help.

Sarah

[UKSBD]

Thank you,
I have spoken to VAT helpline, not very assuring when he says after I
have said a few things to him that he now knows as much as me :(
They are having training soon and ring back next month was his advice.

He did confirm it is quartely (calender month, so not the same as my VAT
quarters)
I have now started the process of doing it online (just have to wait for my
gateway pin now)

Are these the sorts of things a normal high street accountant
(no disrespect to normal high street accountants) can advise on, or does
it need specialist VAT advise?

[yorkshirejames]

Thank you,
I have spoken to VAT helpline, not very assuring when he says after I
have said a few things to him that he now knows as much as me :(
They are having training soon and ring back next month was his advice.

He did confirm it is quartely (calender month, so not the same as my VAT
quarters)
I have now started the process of doing it online (just have to wait for my
gateway pin now)

Are these the sorts of things a normal high street accountant
(no disrespect to normal high street accountants) can advise on, or does
it need specialist VAT advise?

I would expect the typical high street accountant to have some knowledge, but also to have people they can use for specialist questions.

[David Griffiths]

I would expect the typical high street accountant to have some knowledge, but also to have people they can use for specialist questions.

It's the sort of thing that we would check using reference material or by reference to a specialist.

If somebody was paying me to deal with this, I'd research it. I wouldn't do that just to answer a question on a forum - I'll just wait for one of the VAT bods to come along, watch and learn! :p

[Kevin Hall]

Your low-end accountant should be aware that there are changes, and will be able to research up to a point. There is a LOT of material to get through, so there might perhaps be some "skimming" and certain crucial aspects might be overlooked. Certainly, when I first looked at it, I underestimated the complexity of the work required by many of the changes.

Of course, an experienced accountant (i.e. someone who does things properly, and for whom you would have to pay mid-range fees) should read it all several times and analyse it in a reasonable manner.

But I am trying to highlight two shortfalls at once here. First, businesses themselves might still be largely unaware that they need to get this sorted out. I would suggest that those who try to complete the VAT forms themselves might benefit from one-off guidance from a VAT specialist.

Secondly, those accountants who do not particularly specialise in VAT will reach a certain stage in their (lengthy) researches and find that certain crucial answers are missing. At this stage, they too would probably benefit from consulting with a VAT specialist.

Hope it helps?

[elainec100@cheapaccounting]

So glad we have Steve Kettle, our vat expert, to guide us through all of these changes.

[Kevin Hall]

Hi Sarah

May I refer you to the answer I gave earlier?

So the conclusion I draw, personally speaking, is that services supplied to a company or person which carries on an economic activity (e.g. a business) are supplied where the business customer is located, whether or not they are registered for VAT there.

Article 196 then states that the customer must be responsible for paying any VAT on that transaction, in their own country.

and

Some of these exceptions do refer to electronically-supplied services ... but always to supplies made to "non-taxable persons". In other words, if your customer is not conducting an economic activity (e.g. a business), but is instead just a private individual or a "holding company", then these exceptions will apply. So you should hold documentary evidence that your customer is "in business".

and finally

As for the EC Sales List rules, I believe HMRC have already stated that those customers without VAT registration numbers, to whom qualifying Reverse Charged sales are made, should indeed simply be omitted.

Essentially, if a UK VAT registered supplier (such as yourselves) is supplying services to an overseas business customer; and if that business customer is registered for EC VAT; and if the transaction does not fall within one of the exceptions (your supplies do not, at first glance, appear to fall within the various exceptions for 2010); then personally speaking I would usually expect that supplier to be completing an EC Sales List for these supplies in 2010. Your deadline will be two weeks after the period end, unless you are registered for online EC Sales Lists.

But in all seriousness, Sarah, you cannot rely on unpaid advice from a forum such as UKBF. You need to be able to blame someone if their advice is incorrect: but UKBF commentators are not paid for their advice and they cannot accept responsibility for their views on scenarios when they have seen no documentation and not acquired a detailed understanding of precisely what it is that happens in your business. Penalties for late EC Sales Lists are up to £15/day, by the way.

Hope it helps?

[yorkshirejames]

Your low-end accountant should be aware that there are changes, and will be able to research up to a point. There is a LOT of material to get through, so there might perhaps be some "skimming" and certain crucial aspects might be overlooked. Certainly, when I first looked at it, I underestimated the complexity of the work required by many of the changes.

Of course, an experienced accountant (i.e. someone who does things properly, and for whom you would have to pay mid-range fees) should read it all several times and analyse it in a reasonable manner.

But I am trying to highlight two shortfalls at once here. First, businesses themselves might still be largely unaware that they need to get this sorted out. I would suggest that those who try to complete the VAT forms themselves might benefit from one-off guidance from a VAT specialist.

Secondly, those accountants who do not particularly specialise in VAT will reach a certain stage in their (lengthy) researches and find that certain crucial answers are missing. At this stage, they too would probably benefit from consulting with a VAT specialist.

Hope it helps?

Please may I endorse what Kevin is saying. I was previously employed in the VAT and tax team of a multinational organisation, and as a result had a higher than average degree of VAT advisory/VAT compliance knowledge than average. Due to the work I have been doing of late however, it is unlikely that I will take the time to bring myself upto speed with these changes unless a client specifically requires it. As a result, I will be calling on specialist VAT resource more over the next few months (I do have one very good guy, whom I cannot recommend highly enough, and as others have said there are other options available.

To the typical small business owner, I would endorse going to your own accountant first of all, getting their initial advice (though remembering that you get what you pay for, and a £25 per hour book-keeper/low level accountant is unlikely to know as much as someone who charges £200 per hour - but there area always exceptions and I do not want to upset anyone) but that if the advice they give isn't what you expect then push them to take counsel from a specialist VAT advisor. If your own accountant won't do this, you are welcome to come through myself.

[spencergate]

Kevin, Many thanks for starting this thread, and the advice you and others have contributed so far.

I have a client who's sales, I think, will be affected by this (he sells "sales consultancy services" (to my mind he acts as a sales agent) to a company in Italy, working with their customers in Australia/far east).

We established at the beginning that there was no requirement to complete EC sales lists, but I guess this might well change.

I will need to consult someone about this, and I wonder if our provincial accountants will have the knowledge I need.

[Kevin Hall]

Decent accountants will know their own weak areas and will have a specialist like myself to assist them in unusual cases (such as the ECSL VAT changes/distinctions for 2010). It is possible your accountant might have a similar set-up.

Intermediary services (agents) always used to be very difficult indeed. Sometimes they were Reverse Charged, but if so it would be under an usual section of the VAT legislation: so the customer's being "in business" was not enough, we absolutely needed the customer's EC VAT registration number or overseas VAT registration requirements might arise.

Furthermore, we often needed to strip away the immediate client and understand the VAT "Place of Supply" of the underlying transaction being facilitated by the intermediary (agent), which we would not always have full information for. Of course, we always had to start with the disclosed/undisclosed agency distinction, which is always fun to explain!

This complexity is largely reduced by having the General Rule (whose services must be reported on EC Sales Lists). Intermediary services need only fall into the above complexities if supplies are made to "non-taxable" persons (i.e. those who are not an "economic operator", such as a private individual). Though assumes that the service is a "disclosed" agency.

Even so, as you have an EC element (Italy) and a non-EC element (Far East/Australia), you must also consider whether the use+enjoyment rules override the General Rule. These rules are "subsection 10" of the "Particular Provisions" in the 2010 EC VAT law, so they will override the General Rule ... provided they have been activiated for your client's services.

Unfortunately, leaving aside the lack of information about the precise nature of your client's transactions (and their client's transactions), there is also a choice in the legislation at this point: each country can make its own choice about whether or not these use+enjoyment rules will apply to particular transactions.

I have developed a network of VAT contacts throughout the EC and can find out such details (which is the advantage of having a specialist VAT advisor like myself). But sadly I cannot do this for free for UKBF.

Anyway, I hope it helps to outline some of the issues you might want to address with whomever you choose to provide you some advice?

[spencergate]

Thanks for that Kevin (I think, it's soooo complicated).

I do remember having discussions with the VAT office when my client originally went into business, regarding whether VAT was chargeable or not. It was finally decided that his consultancy services were not subject to VAT in this cross-border scenario, and my client has a letter confirming this advice (which I advised him to file carefully, as we may need it in the future).

I know the place of supply rules exercised my brain somewhat at the time.

I suspect this is now all going to change. I may be contacting you to see how much you would charge us to clarify this matter on our behalf.

[Kevin Hall]

I suspect this is now all going to change.

The VAT rules will indeed have changed. But for many international service-suppliers, the VAT outcome will remain the same. For others, this is not the case.

Certainly the letter from HMRC might not be valid now and you should seek confirmation from HMRC as to whether the policies therein continue to apply (or not).

Unfortunately, there are formal rules for making Written Enquiries to HMRC now: if these rules are not followed to the letter, the enquiry could well be rejected and/or you will be referred to the VAT Notice which was unclear to begin with. For example, do make sure you set out chapter and verse your reasons for believing that a certain application fo the VAT rules is valid, and what other interpretations you have considered (and why you have rejected this alternatives).

Even then, HMRC are understably inundated with questions of this kind at the moment, so you might not receive an answer before 1 January 2010.

Hope it helps?

[Kevin Hall]

Well, 2010 is here and the journey has begun. Indeed, since about 2 weeks in we have been awash with queries on international transactions.

Is anyone here struggling to understand/answer the issues involved in getting the invoicing right (e.g. including the Time of Supply on invoices and determining this in accordance with the new rules)?

[Meadowlands]

I am completly lost with all of this!!

We have several EC based clients who until recently did give us their VAT no so was advised to charge VAT (now worried this was wrong!!). We supply then a monthly web subscription to our site, reports by email and research and then report for them. What do I have to do now? I have the VAT no so I don't charge VAT but will i have to do an EC sales list and on invoices should it be on the reverse charge?

Where do I go to find a VAT adviser? this is hurting my brain I have looked at the HMRC site so often I am going round in circles. Looks like I am not the only one. I have asked our accountant but with self assessment deadline he has not had time to get fully up to speed

Thank you for all your help on this thread already!

[Kevin Hall]

Hi Meadowlands.

It certainly sounds as though you should not have been charging VAT to your VAT registered clients; and it sounds as though you ought to be charging no VAT now, whilst adding these supplies to the new EC Sales List.

However, everything depends on understanding very clearly the details of your trading activity.

Hope it helps?