UK publishes guidelines about new reverse charge
Last 18 August 2016 HMRC published a guidance on the announced reverse charge on telecommunication services.
The new guidance explains the reverse charge mechanism and provides detailed explanations on the obligations of suppliers and customers falling under the scope of this reverse charge. The guidance also lists the exceptions when this system does not apply and gives practical information about the invoicing rules. The full guidance can be accessed through the website of the UK tax authorities.
Reverse charging VAT is an exception to the general rule on VAT. Normally, it is the supplier who must account to the tax authorities for any VAT due on the supply. However, for certain goods and services, the obligation to account for the VAT element of the transaction is ´reversed´ and passed to the customer. From an accounting point of view, this system is easy for the customer as it only requires the VAT element to be booked both, in the input VAT account and output VAT account, with the corresponding nil effect in the VAT position.