New Vat rules for overseas services

If your VAT-registered business supplies or receives services from businesses in the EU then you need to be aware of some new rules which came into effect on 1st January, 2010.

Businesses supplying services to EU-based businesses will need to complete an EC Sales List (ESL - VAT form 101). There are penalties for failing to do this.

Businesses receiving services from EU suppliers outside the UK (with some exceptions) will have to account for VAT under the reverse charge provisions. The reverse charge is reported on the VAT return as output tax and input tax. Some businesses which cannot recover all their input tax (ie with partially exempt supplies) will suffer and non-VAT registered businesses need to be mindful of this when reviewing whether they have to register for VAT