Update on VAT package
We reported in February this year on the new place of supply rules for cross border services, due to come into effect on 1 January 2010.
One additional reporting obligation will also be introduced on that date. Those businesses providing services to businesses in other EU countries, will have to complete Electronic Sales Listing Reports (“EC Services Listings”). Currently such statistical reports are only required for cross border supplies of goods.
The new reports for services will report sales, who the customer is and where they belong. The purpose of these reports is to enable cross border “matching” of sales and purchases, to ensure the correct VAT amount is accounted for by the customer.
Businesses which are affected by the new changes should take early action to review systems and controls to identify how the new rules will affect them. The capture of this data may require system changes and even a new report to be generated. Finance staff involved in VAT return completion will have to understand the new rules to be able to apply them correctly.
It is worth noting that the new rules for penalties will already be in place (April 2009), when these new rules are introduced. The new penalty regime is based on “behaviours”. A penalty of 10- 30% for “failure to take reasonable care” will be payable. HMRC’s guidance on the new penalty system indicates that if a business unintentionally omits to do something that a reasonable person would be expected to do, then a penalty will be applied.
We expect there will be a considerable number of penalties imposed under the “careless error” category and it remains to be seen how HMRC will apply the rules in practice. HMRC have issued Business Brief 53/08 which outlines the requirements.
Date: 7th November, 2008
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