While businesses have only recently got to grips with the
reduction in the standard rate of VAT to 15%, chartered accountants
Clement Keys are warning that they need to prepare for major
changes to the UK's VAT system in 2010 that will cause more
disruption and chaos.
"Not only will the standard rate of VAT revert back to 17.5% or,
as some pundits predict, increase up to 22.5%, with all the
associated amendments to accounting systems, but new reporting
requirements will also be introduced in respect of intra EC trade,"
says director of VAT Services Steven Simmonds.
Currently, most organisations that trade with businesses in
other EC member states submit quarterly EC Sales Lists (ESLs) for
goods. From 1 January 2010 a new European system, will
come into force across all member states regarding the
implementation of wide-ranging changes to the way EC businesses
deal with one another for VAT purposes and how they report trade to
the tax authorities.
Whereas ESLs are currently only necessary for sales of taxable
goods, under the new system there will be a requirement to submit
ESLs for taxable 'reverse charge' services.
New rules on the place of B2B supplies will also be phased in
with the place of supply shifting to the principal place or
business of the customer rather than where the supplier belongs an
extention to the 'reverse charge' rules. Plans are also
underway to introduce new rules for B2C supplies.
"It's important that businesses ensure their accounting software
is ready and able to identify these 'reverse charge' services and
train their staff to recognise when and where they are made or
received, so that these supplies are posted correctly to their
accounting systems," adds Mr Simmonds.
With effect from 1 April 2010 HM Revenue & Customs plans to
phase out paper VAT Returns for businesses with an annual VAT
exclusive turnover of £100,000 or more. In addition,
any business registering for VAT from that date will be required to
submit returns and pay VAT electronically. Although paper
returns will still be allowed for businesses with a turnover of
less than £100,000, this is due to be reviewed in 2012.
Businesses should start thinking now about compliance with the
new rules and are advised to contact their VAT advisor for further
information on the forthcoming changes and their likely
impact.