VAT update: August 2013

A number of VAT consultations were announced in the Budget 2013. 

Exports outside the EU

The consultation will look at introducing secondary legislation on zero-rating certain supplies of goods for export outside the EU. Currently in the UK sales to businesses which are VAT registered in the UK and have no business establishment in the UK are at a standard rated supply where they arrange for export of the goods to a non-EU destination.

This is incompatible with EU law as it should be zero-rated. Following from the consultation it is expected to correct this contravention by early autumn. There will also be a change following this on zero-rating goods dispatched to other EU member states.

Place of supply of telecommunications

A change to the place of supply rules for the supply of telecommunications, broadcasting and e-services will be introduced in Finance Bill 2014.

The current place of supply is where the business is established; the change will be to move the place of supply to where the consumer is located. The change will be effective from 1 January 2015 as it has already been agreed at the EU level. In order to limit the impact on businesses a Mini One Stop Shop (MOSS) will be introduced from 1 January 2015, allowing businesses the option to be registered in just the UK and account for VAT due in any other member state by submitting one return.

See Related Links for details on the changes and MOSS.


Tax free shopping

There will be a consultation on redesigning the Retail Export Scheme. This is used to refund VAT on goods bought in the UK by non-EU visitors who export the goods in their personal luggage.

The proposal is to make the scheme easier to use, easier to understand, reduce the number of errors, improve compliance, protect the revenue and represent good value for money for the taxpayer.  This may mean the scheme becomes digital.

Educational establishments

Announced in Budget 2012, the government consulted on the VAT treatment of degree level education. The proposal was to extend the exemption to commercial entities that supply the same level of education. As a result of responses to the consultation there will be changes and it will now look at developing alternative options. There will therefore be a new consultation on this matter later this year, addressing the concerns previously raised.