Principal Harris & Company
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VAT reverse charge extended to services

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24th Mar 2010
Principal Harris & Company
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The Treasury has announced that legislation will be introduced in Finance Bill 2010 to amend the legal provision for a reverse charge to combat Missing Trader Intra-Community (MTIC) fraud in goods to enable it to apply equally to services with effect from 1 November 2010.

The measure will be used to introduce a reverse charge for supplies of emissions allowances, requiring purchasers to account for VAT rather than suppliers, to replace the interim zero rate for these services introduced on 31 July 2009.It also provides an option of introducing reporting requirements to deal with fraud in the services sector.

There will however be no additional reporting requirements in respect of emissions allowances and so suppliers will not be required to submit reverse charge sales lists for such supplies.

The Government has clearly identified emissions allowances as a potential source of tax loss, adding them to anti-avoidance provisions previously introduced for intra-community purchases of mobile phones and computer chips. In future the Treasury will be able to amend the categories of goods and services covered by these rules simply by statutory instrument, enabling it to respond rapidly if further potential sources of MTIC VAT fraud are identified.

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