New VAT anti-evasion rules for businesses wholesaling telecommunications services

New anti-evasion rules are being introduced by HMRC with effect from 1 February 2016, which will affect how businesses account for VAT in relation to the wholesale of telecommunications services in UK. Businesses affected need to take steps to ensure that they account for VAT correctly once the new rules come into force.

The new rules will introduce a mandatory domestic reverse charge for wholesale supplies of telecommunications services in the UK. The implication of this is that it will be the responsibility of the wholesale customer to self-account for VAT on such supplies. By shifting the onus of who accounts for the VAT on such sales from the supplier to the customer, HMRC hopes that this will remove the scope to evade any VAT owing to HMRC. This is an anti-fraud measure intended to counter missing trader intra-community fraud in the industry.

As mentioned above, the new rules come into force on 1 February 2016 and will only impact business-to-business transactions between counterparties established in the UK. Businesses potentially affected by these changes are those which buy or sell wholesale telecommunications services in the UK, including (but not exclusive to):
  • airtime carriers;
  • network operators;
  • message hubbing providers;
  • short messaging service (SMS) and voice aggregators.
What do you need to do?

Businesses affected by these new rules need to take appropriate steps to ensure that they comply. These would include:
  • determining whether the supplies of telecommunications services are in fact one of the affected services;
  • applying the domestic reverse charge where appropriate;
  • ensuring the special invoicing procedures are in place for affected supplies;
  • updating VAT accounting procedures.
If you think the new rules will affect your business and would like to discuss the above changes, or any other VAT issues, please contact Mustafa Sikandary, VAT Senior Manager at Moore Stephens.