Headline:
Reverse charge VAT on mobiles and chips from 1 June
Description:
The expected flurry of press releases which do not wholly relate to but seem to accompany the budget has started with the announcement that the long awaited VAT reverse charge anti-MITC fraud measure will be introduced on 1 June 2007.
Under the VAT reverse charge procedure, the supplier of the specified goods does not account for the VAT on their sales when selling to other VAT-registered businesses - instead it is the responsibility of the purchaser of the goods to account for the VAT. Provided that the purchaser has correctly done so, they can recover this VAT in the normal way. This means that HMRC is not put in a position where it may have to make repayments of VAT where the corresponding tax on the sale has not been paid over.
An announcement was made in January 2006 that the UK government was seeking a derogation to introduce the reverse charge, and legislation was included in FA 2006 enabling the reverse charge to be implemented on agreement of the derogation. Businesses complained that it had very little time to prepare for the changes which were expected to go ahead last year. New detailed guidance and draft legislation is expected shortly.
The derogation covers two categories of goods:
mobile telephones
computer chips/microprocessors/central processing units
Official estimates of the level of MTIC fraud in the UK for 2005-06 were published in December and are almost as high as the sums wrongly paid out by HMRC in tax credits. Whilst the tax credits problem has been temporarily hidden by changing the level of income “disregard” to £25,000, at least some people of poorer income benefit from the overpayments. Not so the case with MITC, which soley benefits organised criminals who appear to target the UK in preference to its neighbours
source:accountingweb
Under the VAT reverse charge procedure, the supplier of the specified goods does not account for the VAT on their sales when selling to other VAT-registered businesses - instead it is the responsibility of the purchaser of the goods to account for the VAT. Provided that the purchaser has correctly done so, they can recover this VAT in the normal way. This means that HMRC is not put in a position where it may have to make repayments of VAT where the corresponding tax on the sale has not been paid over.
An announcement was made in January 2006 that the UK government was seeking a derogation to introduce the reverse charge, and legislation was included in FA 2006 enabling the reverse charge to be implemented on agreement of the derogation. Businesses complained that it had very little time to prepare for the changes which were expected to go ahead last year. New detailed guidance and draft legislation is expected shortly.
The derogation covers two categories of goods:
mobile telephones
computer chips/microprocessors/central processing units
Official estimates of the level of MTIC fraud in the UK for 2005-06 were published in December and are almost as high as the sums wrongly paid out by HMRC in tax credits. Whilst the tax credits problem has been temporarily hidden by changing the level of income “disregard” to £25,000, at least some people of poorer income benefit from the overpayments. Not so the case with MITC, which soley benefits organised criminals who appear to target the UK in preference to its neighbours
source:accountingweb
Date:
20.03.2007
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