Enter Your E-mail

Further Regulations have been laid before Parliament, which add to the group of statutory instruments that have been made as a result of the introduction of reverse charge accounting in relation to the supply of certain goods of a kind used in missing trader intra- community fraud (MTIC).

The Value Added Tax (Amendment) (No. 4) Regulations 2007 (SI 2007/1599) come into force on 1 July 2007.

MTIC fraud  arises through contrived transaction chains involving supplies of high value goods with the tax loss occurring when the VAT charged by the supplier is not paid to HMRC but a repayment of that VAT can be claimed by the first or subsequent purchaser of those goods. Attempted MTIC fraud in 2005-06 was estimated at between £3.5bn and £4.75bn, with an impact on VAT receipts in 2005-06 estimated at £2bn to £3bn.

Reverse charge accounting makes it impossible to perpetrate MTIC fraud using the goods to which it applies, because it removes the possibility of traders claiming VAT repayments in this way.

Businesses making supplies of goods to which the reverse charge applies are required to submit to HMRC sales lists showing the VAT registration number of each of their customers for such supplies, and the total value of supplies to each customer, by calendar month. This is necessary to enable HMRC to ensure that those customers are accounting for the reverse charge correctly, and thereby provide an effective control mechanism for the reverse charge, in accordance with the terms of the UK’s derogation. Businesses making such supplies also have to first notify HMRC of that fact, so that they can be given access to the on-line facility for submitting sales lists.

For related reasons, HMRC also need to be informed if businesses making reverse charge supplies stop making such supplies, so that they are no longer required to submit sales lists, and if they then resume making such supplies, so that their access to the online facility for submitting sales lists can be reactivated.

The other instruments in this group, which came into force on 1 June 2007, are:

• The Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2007;
• The Value Added Tax (Amendment) (No.3) Regulations 2007;
• The Value Added Tax (Payments on Account) (Amendment) Order 2007; and
• The Value Added Tax (Administration, Collection and Enforcement) Order 2007.

Link

Value Added Tax (Amendment) (No. 4) Regulations 2007: Explanatory Memorandum