For Professional Contractors and Freelancers with UK limited VAT
registered companies supplying services abroad; important changes come
into effect on 1st January 2010.
The current rules based on the 'place of supply' which is determined
by the 'place of belonging' will no longer apply thus simplifying the
VAT system. The current 'basic rule that the VAT is charged where the
supplier is established will change to the VAT being accounted for
where the customer is established.
With effect from 1st January 2010
The Place of Supply rule - BN74
VAT will be charged to where the supplied service is being
consumed; i.e. where the customer is established, so you will no
longer charge VAT from the UK.
Where the services supplied are made to a non-business customer the
rules remain unchanged and the supplier will still charge VAT.
Changes in the times in which to account for VAT - BN75
Where the supply is a one off, VAT will be accounted for at the end of the supply; or by the payment date if it is earlier.
For continual services, VAT will be accountable at each billing period; or payment period if it is earlier.
For continuous supplies that are not subject to billing or payment periods the VAT will be accountable at 31st December each year or the payment date if it is earlier.
EC Sales Lists - BN76
All UK businesses supplying services to EU countries where the VAT
is accountable in that country under the reverse charge procedure will
be required to complete and file EC Sales Lists (ECSLs) to HMRC. These
detail the customer VAT number and the net value of the sales at each
calendar quarter.
New time limits will apply for submitting returns from currently six
weeks to 14 days for paper submissions and 21 days for electronic
filing.
Changes in the VAT refund process - BN77
For businesses that incur VAT in another country a new electronic
filing system will come into effect from 1st January 2010 enabling you
to claim the refund in the UK instead of in the country the supply is
being made.
Claims will be able to be made for up to nine months from the end of
the calendar year in which the supply was made. HMRC will have up to
four months in which to make the refund (8 months if there is a
dispute) and the member state of refund will be subject to interest if
the business has supplied the correct information and the deadline was
not met.
Changes to Schedule 5 of the VAT ACT 1994 - Services supplied where received
Schedule 5 sections 1-6 will be repealed so that services of
consultants, engineers, lawyers, accountants, data processing, banking,
financial, insurance and other similar services who currently charge
VAT for their services to businesses will no longer have to. VAT will
be accounted for by the consumer in their country.
Services provided to non-business consumers will remain the same; VAT will be charged by the supplier.
Cultural or artistic services
From 1st January 2011 and 2012 there will be further
changes for certain industries, namely, (of both business and
non-business customers) cultural, artistic, sporting, scientific,
educational and entertainment VAT will be chargeable where the event
takes place.
Useful Links
Cross-Border VAT Changes effective 1st January 2010
Supplying Services Abroad
BN74
BN75
BN76 - EC Sales Lists
BN77
Schedule 5 of the VAT ACT 1994