In addition to the existing domestic reverse charge in place in the UK for certain supplies of mobile phones, computer chips, and more recently emissions allowances, HMRC have now
In addition to the existing domestic reverse charge in place in the UK for certain supplies of mobile phones, computer chips, and more recently emissions allowances, HMRC have now announced that certain wholesale supplies of gas and electricity will be subject to the domestic reverse charge, in an ongoing effort to reduce instances of MTIC fraud.
The new legislation, which will be contained within VATA 1994 s.55a, means that where a UK established business makes certain wholesale supplies of gas and electricity to another UK established business (with the place of supply being the UK), it will be the responsibility of the customer to account for UK VAT through their UK VAT return. The supplier will still report the sale in box 6 of their UK VAT return, but no output tax will be declared, as has previously been the case.
As stated, the reverse charge will only apply to certain wholesale transactions. Supplies for consumption by the customer will be excluded from the reverse charge and output tax must still be charged by the supplier. A full list of other exclusions is contained in Revenue and Customs Brief 23/14.
It is important for those affected by this change to be aware that, unlike with mobile phones and computer chips, there will be no de minimis limit in place. Subsequently, any relevant supplies will be subject to the reverse charge with effect from 1 July 2014. There will be no requirement for suppliers to submit reverse charge sales statements.
Whilst HMRC have indicated that they will take a light touch regarding errors on the implementation of this treatment, penalties may still be forthcoming for non-compliance.
Who is this important for?
Businesses making and receiving wholesale supplies of gas and electricity should consider how their systems will comply with these changes, particularly where invoicing and completion of the UK VAT return is concerned.
Brendon Silver
VATit GROUP
