Use Reverse Charge VAT
Access Accounts has been updated to permit Reverse Charge Accounting for VAT for businesses trading in mobile telephones and computer chips in line with a new legislation introduced by HMRC.
The reverse charge accounting legislation has been introduced to combat missing trader intra-community (MTIC) fraud, also known as carousel fraud. See What is MTIC fraud?
The new legislation will affect GB VAT registered businesses trading in particular goods.
The use of Reverse Charge rules and the applicable VAT Code relates to transactions between GB VAT registered suppliers and customers only.
There is a de minimis limit (too small to be concerned with) of £5000 exclusive of VAT, below which the reverse charge will not apply.
Businesses will have to notify HMRC within 30 days of making their first supply to which the reverse charge applies.
Under the reverse charge accounting mechanism, it is the responsibility of the customer, rather than the supplier, to account to HMRC for VAT on supplies of the specified goods.
VAT-registered businesses which sell the goods described below will need to consider whether the reverse charge applies to their transactions. Businesses which purchase goods to which the reverse charge applies must account for VAT on those purchases to HMRC.
Additionally, companies that sell these goods within the UK will need to submit a Reverse Charge Sales List, in line with their VAT Return, detailing all of the monthly Reverse Charge sales transactions to each customer.
Cash Accounting - Businesses using the Cash Accounting VAT scheme who are purchasing or selling goods to which Reverse Charge VAT applies should exclude those transactions from the scheme and account for them under the Reverse Charge accounting provisions.
The specified goods
The terminology can be confusing; you should refer to the official Trade Tariff website.
The specified goods to which the reverse charge applies are:
Mobile telephones
For the purpose of the reverse charge, mobile telephones include:
any handsets which have a mobile phone function (i.e. the transmitting and receiving of spoken messages), whether or not they have any other function. It therefore includes other communication devices, such as Blackberrys,
mobile phones supplied with accessories (such as a charger, battery, cover or hands-free kit) as a single package,
pre-pay (or ‘pay as you go’) mobile phones, whether or not the selling price includes an element attributable to the cost of future use of the phones and
mobile phones locked to a network but not supplied with a contract for airtime.
However, the reverse charge does not apply to the following:
mobile phones which are supplied with a contract for air time,
mobile phone accessories which are supplied separately from a mobile phone,
walkie-talkies,
WiFi phones unless also intended for use with mobile phone networks and
3G data cards or WiFi cards.
Computer chips
The tariff commodity code for computer chips covers:
small integrated circuits (i.e. Central Processing Units or CPUs),
discrete integrated circuit devices (i.e. Microprocessors or Microprocessor Units (MPUs) and Microcontrollers or Microcontroller Units (MCUs) and
chipsets: the dedicated cluster of integrated circuits which support MPUs.
The reverse charge applies to such items when they are in a state prior to integration into end-user products or where they are sold separately and not as part of an assembled item, for example a motherboard. Items such as computer servers, laptops or desktop units are excluded from the scope of the reverse charge.