Cross Border VAT Changes

Changes to the EC Sales List format

As of 1 January 2010, it will be a legislative requirement for a UK VAT Registered Business to declare any Intra-EC Services that they receive from a VAT Registered Supplier in the EC on the EC Sales List (ESL – VAT 101 form).

The ESL currently includes the supply of business-to-business (B2B) goods to customers in the EU.

From 1 January 2010, ESLs are required for B2B supplies of services. The default reporting frequency for both goods and services on the ESL will be monthly. But businesses may be able to opt to submit quarterly ESLs for services only.

The amount of time that HMRC and other tax administrators in the EU are allowed to collect and exchange data between each other is being reduced to one month. This means that businesses are likely to have a certain number of days after the end of the reporting period to submit their ESLs:

• 14 days for paper ESLs
• 21 days for electronic ESLs

Note: Intra-EC Services must (still) not be included on the SD report.

Please note that the first new format EC Sales List will require submission by the middle of February 2010.  Details of the changes can be found on http://www.hmrc.gov.uk/vat/ec-sales-lists.pdf

Thresholds and Reporting Periods

During the period 1 January 2010 to 31 December 2011 quarterly ESLs can still be submitted if:

• The total quarterly value of supplies of intra-EC goods, (excluding VAT), does not exceed £70,000 in the current quarter, or any of the previous 4 Quarters. 

The place of supply for suppliers or customers of services

The place of supply is used to decide where VAT must be paid and how VAT should be accounted for.

From 1 Jan 2010 the place of supply for Intra-EC services changes to where the customer is, rather than where the supplier is. UK businesses need to account for VAT on these services as both the customer and the supplier of the service. The supplier will not account for VAT in their country. This is done under the so called ‘Reverse Charge’ provisions, which is also called the ‘tax shift’.

The VAT Return will be updated by the customer for both the supply of the service by the supplier and the receipt by the customer.  A Service Item VAT Code will automatically update the following boxes:

Box 1 – the amount of output tax (VAT due on sales)
Box 4 – the amount of input tax (VAT due on purchases)
Box 6 – the value of the supply (total value of sales)
Box 7 – the value of the supply (total value of purchases)

Software Release Schedule

During November 2009, Pegasus will be releasing new versions of Opera II, Opera and Capital Gold Accounts.