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Are you affected by the 2015 VAT changes?

On 1st January 2015, the VAT treatment of B2C supplies of Broadcasting, Telecoms and Electronic (BTE) services is changing. Currently, VAT is charged at the rate applicable in the country in which the supplier is established. From 1st January 2015, the place of supply switches to the country where the customer is established – a significant change that will have a big impact on businesses that supply these services. To help organisations handle the changes, the EU is also introducing the VAT Mini One Stop Shop - a scheme which reduces the administrative burden and provides an alternative to registering for VAT in multiple countries.

Who will be affected by the changes?

At first glance, the scope of these changes may seem fairly narrow and unlikely to affect many companies. However, when you look a little closer at the specific supplies that fall under each category, it is clear that the changes will affect a huge number of companies from a wide range of industries.

I recently spoke to Ruth Corkin about the upcoming changes. Ruth is the National Technical Chair of the VAT Practitioners Group and she expressed her concerns that many companies are unprepared for the forthcoming changes and what is worse, many of those companies remain completely unaware that the changes are likely to affect them.

I asked Ruth why many companies are unaware of the full impact of the changes. She gave the excellent example of applications sold via mobile marketplaces and confusion over who is making the supply.

Agent v Principal

When apps are sold to consumers via the Apple store, the contract is between Apple and the consumer and therefore it will be Apple who are affected by the changes. In this situation the app developer would not have to worry too much about the rule changes as they are not making a B2C supply – they are making a B2B supply to Apple. It would be easy to assume that this will be the same with similar marketplaces – but this is where things can get complicated. For instance, with the Google Play Store and Amazon Appstore, it is the app developer and not the marketplace that is considered to be the principal. So for any apps sold to a consumer via these stores, the app developers are the suppliers to the consumers and the ones affected by the rule changes.

This is just one example of many potentially confusing issues that could arise when the 2015 changes are implemented. Organisations will need to look very closely at what they are supplying, who they are supplying and whether it falls within the scope of the changes.

Telecoms and Broadcasting are reasonably well defined categories and it is fairly obvious which services fall under their definitions. It is the last category of electronic services that is much wider reaching and has the potential to cause confusion.

We are hosting an online event on the 20th November which will address the 2015 changes and introduce you to the new VAT Mini One Stop Shop. If you think you may be affected by the changes then this gives you an excellent opportunity to ensure you’re prepared and to ask our expert presenter any questions you might have. You can find out more about the event here.


Stephen Smith
Managing Director
UK Training (Worldwide) Limited

 

 

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