International Trade – EU VAT simplifications delayed

The European Council of Finance Ministers (ECOFIN) meeting earlier this month rejected the "VAT package" put forward by the European Commission. The Commission had proposed:-

  • by 1 January 2008, changes to the place of supply of business to business services and business to consumer supplies of telecommunications and radio and TV broadcasting;
  • by 1 January 2009, changes to the rules for VAT refunds to businesses that incur VAT in other countries; and
  • by 1 January 2010, entry into force of the one stop shop scheme for registration and declaration of VAT across the EU and changes to the rules on place of supply of electronically supplied services supplied to, and hiring of means of transport by, individuals.

It now seems that all these changes will be delayed, due to objections from Germany, Portugal and Luxembourg. The ECOFIN meeting did agree that the current rules for the treatment of electronically supplied services (which were due to expire on 30 June 2006) will continue, but only until 31 December 2006. This suggests that ECOFIN anticipates that the wider VAT package will be in a form that can be agreed by then.

Temporary staff – HMRC consultation

HMRC has announced a review of the VAT arrangements for supplies of temporary staff, inviting affected businesses and other interested parties to contribute their views. Currently, many employment bureaux act either as agents for VAT purposes or are able, as principals, to use HMRC’s staff hire concession. Where they act as agents, bureaux are only required to charge VAT on their commission and those who act as principals (but can use the concession) only pay VAT on an amount excluding salary and other associated costs (broadly equivalent to an agent’s commission). It is possible that, in future, employment bureaux may have to charge more VAT on their supplies, making temporary staff more expensive for any user that cannot reclaim all the VAT (e.g. finance sector businesses, many schools, universities, colleges, etc.)

VAT accounting software – publicly available specification

HMRC are launching a publicly available specification for VAT accounting software. The specification, developed by the British Standards Institution is intended to reduce common VAT errors and help businesses of all sizes to get their VAT accounting right.

This Bulletin is prepared by Deloitte & Touche LLP, a limited liability partnership. Weekly VAT News is designed to keep readers abreast of current developments, but it is a general guide only and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains, or for any errors or omissions.

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