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Summary
MTIC fraud is a scourge of the
VAT system throughout Europe. In
its simplest form, a fraudulent
supplier will charge VAT on a
supply of goods or services and then
simply disappear without paying the
VAT collected from the customer.
The reverse charge mechanism is a
tool in the tax administration's
armoury to prevent such fraud.
Essentially, the supplier is relieved
from having to charge and account
for any VAT. Responsibility is
passed to the customer who
declares the output VAT and claims
the input VAT for the supply in
question on the same VAT return.
The system helps to ensure that any
VAT due on the transaction does
not go missing.
15 January 2016
HM Revenue & Customs Brief 01/2016
HMRC has announced measures to counter what it perceives to be a threat from
Missing Trader Intra-Community (MTIC) fraud in connection with the wholesale
supply of telecommunications services in the UK. A statutory instrument was laid
before Parliament and the measure will come into effect on 1 February 2016.
In normal circumstances, it is the supplier of goods or services that is liable to account
for VAT on the supplies that it makes. In certain cases (where a tax authority considers
it necessary for the protection of the revenue), the liability for VAT accounting can be
transferred to the purchaser of the goods and services rather than the supplier. The
mechanism is known as the 'reverse charge' mechanism (or tax shift mechanism).
The reverse charge mechanism is to be introduced for wholesale supplies of
telecommunication services which take place in the United Kingdom on or after 1
February 2016. Subject to certain exceptions, the domestic reverse charge will apply to
all wholesale supplies of telecommunications services between counterparties
established in the UK. This will typically mean transmission or carriage services of
airtime and telephony related data. The reverse charge will cover telecommunications
services which enable speech communication instantly or with only a negligible delay
between the transmission and the receipt of signal and the transmission of writing,
images and sounds or information of any nature when provided in connection with
such services. The reverse charge will apply to all wholesale supplies: that is supplies
made on a business to business basis.
Comment - businesses involved in the wholesale supply of telecomms services
will need to amend their VAT accounting procedures with immediate effect.
This will include the addition of a statement on each sales invoice making it
clear that the reverse charge applies and that the customer is responsible for
accounting for the VAT on its VAT return.
VAT Reverse charge for wholesale telecomms
VAT Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556