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Budget 2013: VAT

20 March 2013

VAT registration thresholds
The VAT registration threshold for UK established businesses will increase from £77,000 to £79,000 with effect from 1 April 2013. On the same date, the deregistration threshold will increase from £75,000 to £77,000.


VAT: Telecommunications, broadcasting and e-services
As previously announced, EU-wide changes to the VAT rules for telecommunications, broadcasting and e-services will be introduced on 1 January 2015.

What is changing?
EU businesses supplying the above services to private customers in the EU will be deemed to supply their services in the customer’s country rather than in their own country, which is the current position. The ‘mini one stop shop’ (MOSS) will be introduced from the same date, allowing suppliers of such services to use a single registration to account for VAT in all EU Member States. HMRC has promised further guidance for businesses prior to implementation.

Impact
Under the current rules, a private individual purchasing this type of service from a supplier in another EU Member State, pays VAT at the rate in force in the supplier’s country. Consequently, many suppliers have located their businesses in low VAT jurisdictions such as Luxembourg, where the standard rate of VAT is 15%. The changes applying from 1 January 2015 mean that customers will pay the rate of VAT in force in their own country, regardless of where the supplier belongs.

The changes will result in EU suppliers becoming liable to register and account for VAT in all of the EU Member States where they have private customers. In order to minimise the burden that would be caused by multiple VAT registrations, the MOSS will allow suppliers to use a single VAT registration covering the supplies made in all EU Member States. 

Action
Businesses affected by these changes should ensure that suitable systems and pricing policies are in place prior to 1 January 2015, so that VAT is accounted for accurately. Registration under the MOSS should be possible from October 2014.

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