Reverse Charge of Services and EC Sales Lists

Steve Allen of VAT Advisers Ltd outlines an important compliance requirement for certain businesses.

Introduction

The EU ‘VAT Package’ arrived on 1 January 2010. With its arrival came the requirement for supplies of intra-EU reverse charge services to be included on an EC Sales List (ESL).

'B2B' Services

Under the new ‘general rule’ for determining the place of supply of ‘B2B’ services, the long-established list of reverse charge services such as advertising, accounting, consultancy, hire of staff, and electronically supplied services, will be joined by other services such as work on goods, and intermediary  services (remember that ‘B2C’ supplies will have different place of supply rules). The impact of this is that businesses such as accountants, solicitors, PR firms, business consultants, online suppliers of digitised music and games, and even VAT advisers(!), will now have to consider ESLs when dealing with EU business customers.

EC Sales Lists

From 1 January 2010, any service which is reverse chargeable under the new ‘general rule’ will have to go on an ESL. Note that the reverse charge services must not be entered in box 8 of the VAT return, which continues to be only for intra-EU supplies of goods. Without the use of box 8, an initial ESL will not be automatically sent by HMRC, so the first one will either have to be submitted through the online service for ESLs, downloaded from HMRC’s website or requested from the NAS (0845 010 9000). However, once the first ESL is submitted, future Lists will then be sent automatically.

Filing Deadlines

The time limit for submitting paper ESLs has reduced to 14 days from the end of the reporting period, but online submissions will get 21 days (‘nil’ returns need not be sent, however). ESLs submitted for just services will be required quarterly, but can be submitted monthly if so preferred. 

ESLs submitted for goods will be required monthly if related turnover is above £70,000 per quarter (reducing to £35,000 per quarter from 1 January 2012).

If a business is supplying goods and services, they can be included on the same ESL, but ‘Indicator Code 3’ must be used to identify the services. Where the level of goods turnover is below £70,000 per quarter, quarterly ESLs can be used to declare both goods and services. However, if the £70,000 limit is exceeded requiring monthly returns, HMRC suggest that months 1 and 2 are used to declare just goods, with month 3 used to declare goods and the services for the whole quarter.

For more information on the recent VAT changes, see Andrew Needham's article New Rules for Services Supplied to Other EU Countries and New Reporting Requirements

Article Added Sunday, 07 March 2010

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