HMRC have released a policy paper that introduces a VAT reverse charge for electronic communication services.
Businesses involved in making wholesale supplies of certain electronic communications services will be affected by the changes. Under normal circumstances it is the supplier that is responsible for accounting for VAT on a supply. Under a reverse charge that responsibility is shifted to the customer.
The reverse charge will apply to wholesale supplies of electronic communication services such as the routing of telephone calls and associated data (VOIP, text, images etc.) over landlines, mobile networks and the internet.
This is an extension to existing anti-avoidance legislation to combat VAT fraud by removing the opportunity for fraudsters to charge VAT and then go missing before paying it over to the Exchequer in Missing Trader Intra-Community (MTIC) fraud. It does not apply to non-wholesale supplies or to businesses not registered or not liable to be registered for VAT.
If you are concerned about how these new measures will affect your business or wish to limit your exposure to potential fraud in your supply contact our VAT specialists who will be able to assist.
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