Legal Guides

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2020 UK VAT changes for businesses

Is your business clued up on the 2020 UK VAT changes? The following article gives an overview of the changes your business needs to be aware of…

If your business sits within the international market, you’ll need to be aware of the ‘VAT quick fixes’ that came into force on 1 January 2020. These were brought into place to simplify the current, complex processes involved with inter-EU VAT.

Call-off stock

Call -off stock refers to goods that are transferred by a VAT registered business to a customer in another EU country and are only supplied when they are ‘called off’. In this situation, the supplier still has ownership of the goods and is therefore required to register for VAT and charge the local VAT. In some areas such as the UK, there’s already a process in place where instead of the supplier having to register, it is treated as an intra-EU supply by the customer. This process is now being rolled out across the EU as a quick fix.

Chain transactions

Although these consecutive supplies of goods are between three or more owners, it is only transported once which can sometimes lead to transactions being wrongly treated as VAT free. The quick fix has introduced new rules which state that the intermediary supplier must provide the original supplier with its VAT number to ensure the first transaction is treated as an intra-EU supply.

VAT registration number

Already standard procedure in the UK, EU customers’ VAT numbers must be quoted. However, under this quick fix, all EU businesses are required to adhere to this process too; they must check the validity of their customers’ VAT number and report it on the EC Sales List.

Proof of intra-EU supplies

For intra-EU supply to be zero-rated for VAT purposes, proof that the goods have been moved to another EU state must be provided. However, from 1 January 2020, this proof must consist of two items of documentary evidence, these could either be:

(a) two category A documents or(b) 1A and 1B document.

Reverse charge VAT for the construction industry

A drastic change for the construction industry is being introduced from 1 October 2020. Initially due in 2019, the government delayed by a year to ensure the industry was adequately prepared for the overhaul. The shift means that rather than the UK supplier paying VAT, the customer receiving the goods will instead be responsible for paying the domestic reverse VAT. Under the new rule, the customer has the responsibility to declare the VAT as output tax on their VAT return.

This change will have an impact on all contractors who supply construction services, causing huge administrative changes for businesses in the industry, including general construction, groundwork construction, renovations and maintenance, HVAC and cleaning services.

Making tax digital for VAT

The act of making tax digital is the keeping of digital records by a VAT-registered business with taxable turnover above the VAT registration threshold (£85,000), businesses will also be required to file their VAT returns using software. The software used must be capable of keeping and maintaining records that have been specified in the regulations. The software will collate up to date records and prepare your return for you, once you’ve declared that the return is correct, you’re able to confirm that you want to submit it to HMRC.

Businesses have until 1 April 2020 to put all digital links in place.

Article written and contributed by Mitchell Charlesworth Chartered Accountants and Business Advisors 

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. It is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered above, please speak to Mitchell Charlesworth directly

Published on 23rd January 2020
(Last updated 7th May 2021)