Changes To UK VAT Affecting The Communications Industry

16th February 2016  by John

On February 1st the Government introduced new legislation which will change how VAT is charged on wholesale supplies of communications services in the United Kingdom.

What’s Happening?

In an attempt to reduce the impact of tax avoidance schemes, the Government has introduced new legislation that will reverse VAT charges on the sale of wholesale communication services in the United Kingdom. This domestic reverse charge will result in the communication provider who receives the wholesale supply of these services accounting for the VAT instead of the supplier.

In simple terms, VAT will no longer be collected and forwarded by vendors of wholesale communications services. It will instead be paid directly to HMRC by the communication provider purchasing the services

Will This Affect How You Bill For Your Services?

If you offer wholesale communication services to a company that intends to resell them rather than consume them directly, the legislation will affect how you invoice your customer base and adjustments will be needed to accommodate these changes to VAT collection.

Which Services Are Affected?

The new legislation only applies to Voice, SMS, MMS and VoIP call traffic. With internet usage, data transmission, line rental and other services, VAT remains unchanged.

Where it is the case that that these items are bundled and difficult to separate, it is deemed acceptable that the whole charge will be billed using the reverse charge VAT procedure.

When Will It Come In To Effect?

Although the legislation took effect from 1 February, due to the short timescales with which it was introduced, HMRC understands that it might not be possible to implement immediately.

HMRC will therefore, be taking a ‘light touch’ approach for the first six months to assist those companies that are considered to be making reasonable efforts to comply with the legislation but may not be able to do so in time.

Union Street strongly advises that you contact your financial adviser to ensure that you will be taking reasonable steps to comply with the new regulations.

How Can We Help?

To assist you in complying with these changes, Union Street will soon be releasing the latest version of aBillity™ which will incorporate new invoicing features, including:

  • Make customers identified as resellers applicable for reverse charge VAT
  • Identify charges which qualify for reverse charge VAT
  • Calculate and display reverse charge VAT amount on invoices, separate from regular VAT amounts and invoice totals.

If you think you may may be affected by the new legislation contact your Union Street Account Manager.

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