Peter Hughes
Chartered Accountant
VAT on cross-border services
The 2009 Budget gave details of a change to the VAT system which had been expected, namely the place of supply of international services. The present rather complex rules will be streamlined, and most supplies of services from one business to another will be subject to VAT in the customer's country. This means that if you supply consultancy, training, secretarial services or work on goods, for example, to a customer in the UK, you will charge VAT. If you supply the same services to a customer in another country, you will charge no VAT and leave the customer to account for VAT in his own country using something known as the "reverse charge" procedure, which is really just an adjustment to the VAT return.
If you receive services from an overseas supplier, the place of supply will be the UK and you will have to do the reverse charge adjustment to your own VAT return.
Services supplied from a business to a private customer will be subject to VAT in the supplier's country. The new rules start to take effect on 1 January 2010, and there are, as now, numerous exceptions.
Also announced were changes to the system for reclaiming VAT incurred in another EU country, perhaps while your employees are on a business trip. Next year will see some simplifications in the reclaim procedure, including online submission of claims to HMRC in the UK rather than to the VAT authorities in the other country. The deadline for submission of claims will increase to 9 months, and repayments must be made within four months.
Please contact Peter Hughes if you need advice on this wide-ranging subject.
24 August 2009