Press Room
Significant European VAT changes ahead for businesses in
2010
A number of important changes to the European Union VAT system
will take effect from 1 January 2010 and businesses are advised
that they should be taking action now if they are to avoid errors,
warns leading business and financial advisers Grant Thornton.
The 2010 VAT changes will affect businesses involved in supplying
or receiving cross-border services, as well as those reclaiming VAT
incurred in another EU country. The new rules will mean that:
>the company that has to account for VAT in 'business to
business' transactions will generally be the recipient of the
service (although there will be some exceptions)
>the time when VAT has to be accounted for on imported services
will change to when the service is completed. For continuous
services, the tax will have to be accounted for at the end of the
relevant billing/payment period or otherwise on 31 December each
year. Where a payment is received prior to the above dates, the tax
is due on the date that it is received
>businesses supplying services across borders will need to
comply with additional reporting requirements in the form of EC
Sales Lists. From 1 January 2010, there will also be some changes
to the EC Sales Lists that are currently required for the supply of
goods
>businesses wishing to reclaim the VAT incurred in another EU
country will do so by way of an electronic portal in their own
country, rather than by submitting a claim to the relevant overseas
tax authority.
"The impact of the new rules will affect businesses in a number of
ways and the period up to 1 January 2010 is now very short. For
example, from next year UK VAT will no longer apply to management
services invoiced to foreign subsidiaries and the supplier will
have to report the transaction in their EC Sales List for services.
Conversely, the recipients of most services will have to
self-account for VAT on their UK VAT return. Where the recipient is
unable to recover some or all of the VAT that they incur, the self
accounting will result in a VAT cost." says Lorraine Parkin, Head
of VAT at Grant Thornton.
"Businesses will have to accommodate changes to existing IT systems
and procedures. The impact on operating costs also needs to be
considered. Applying the wrong VAT treatment could result in
increased administrative costs and require the issue of credit
notes, refunds of incorrectly charged VAT to customers and
voluntary disclosures to HM Revenue and Customs," concludes
Parkin.
For further queries, please contact Suvra Datta, 0207 728 2375 or
via email on suvra.datta@gtuk.com