As previously covered in eNews, significant changes to the cross-border VAT rules were introduced with effect from 1 January 2010. The changes impact the VAT regime applying to services and also to the intra-EU reporting regime for goods. HMRC have issued an article which summarises how the changes will impact on businesses and which provides links to initial guidance on how HMRC expects these to be implemented in the UK.

According to HMRC, the changes will modernise and simplify the current rules relating to cross-border supplies of services, make the recovery of VAT on purchases made in other EU countries more efficient and will help counter VAT fraud.

The changes involve the following:

• Changes to the place of supply rules
• Changes to the time of supply rules
• New ESLs for services and changes to ESLs for goods
• Changes to the procedure for obtaining refunds of VAT paid in other EU Member States.

Accordingly the changes affect businesses that:

• Supply services to overseas businesses
• Receive services from overseas businesses
• Supply goods to other EC countries, and
• Want to reclaim VAT incurred in another EC country.

The changes will require detailed consideration by affected businesses that will need to ensure that their accounting systems can be adapted to implement the new rules. Businesses will also need to consider obtaining VAT registration numbers of regular business customers in other EC countries.

The full text of the HMRC article is available here.