HMRC have published VAT Business Brief 10/06 concerning reverse charge rules for some types of goods, mainly small electronic components.

The new rules can apply to businesses engaged in trading any of the following types of item:

• mobile telephones
• computer chips/microprocessors/central processing units
• electronic storage medium which may be used in, or in connection with, computers, or any device in categories 1 and 4
• electronic devices used for the storage, processing or recording of electronic data as follows:
1. handheld devices for recording or playing of sound and or images
2. handheld computers
3. handheld communication devices other than mobile telephones
4. positional determination devices for GPS system
5. games consoles with screen, or of a kind used with a television or computer

The idea is to counter what is known as MTIC Fraud. Traders in high-value, easily deliverable items (typically electronic components) sourced from outside the EU were charging VAT on supplies within the EU, but “disappearing” before paying over the VAT they had charged. The new proposals will not take immediate effect as they require the EU to approve a derogation from the Sixth Directive. HMRC are also offering a consultation process with affected businesses.