Finance Bill Tracking Service 2010 | Budget 2010

BN49 VAT: REVERSE CHARGE FOR EMISSIONS ALLOWANCES

Who is likely to be affected?

1. Any business selling or purchasing emissions allowances.

General description of the measure

2. Legislation will be introduced in Finance Bill 2010 to amend the legal provision for a reverse charge to combat Missing Trader Intra-Community (MTIC) fraud in goods to enable it to apply equally to services. This change, when implemented will require any VAT registered business purchasing certain services, which will be specified in secondary legislation, to account for and pay the VAT chargeable instead of the supplier. The measure will be used to introduce a reverse charge for supplies of emissions allowances, to replace the interim zero rate for these services introduced on 31 July 2009.

3. This measure also provides an option of introducing reporting requirements to deal with fraud in the services sector. There will be no additional reporting requirements in respect of emissions allowances and so suppliers will not be required to submit reverse charge sales lists for these supplies.

Operative date

4. The reverse charge for emissions allowances will have effect on and after 1 November 2010. At the same time the zero rate for supplies of emissions allowances will be withdrawn.

Current law and proposed revisions

5. Section 55A of the VAT Act 1994 (VATA) provides that taxpayers purchasing goods of a kind used in MTIC fraud may be required to account for and pay the VAT on their purchases (the reverse charge) instead of the supplier. Currently, taxpayers purchasing certain specified supplies of mobile phones or computer chips are required to account for and pay the VAT on their purchases instead of the supplier. This measure amends section 55A so that it can be applied to supplies of services, as well as goods. Paragraph 2(3B) of Schedule 11 to VATA is also amended to extend the power HM Revenue & Customs has to specify additional reporting requirements in respect of goods used for MTIC fraud to apply equally to services.

6. The changes to section 55A enable the introduction of secondary legislation to specify the supplies to which the section will apply. This will be used to introduce a reverse charge for supplies of emissions allowances, in place of the current temporary zero-rating of these supplies. There will be no additional reporting requirements for emissions allowances, so suppliers will not be required to submit reverse charge sales lists.

Further advice

7. The secondary legislation and associated guidance will be published in the summer.

8. If you have any questions about this change, please contact the VAT Helpline on 0845 010 9000. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk