The Channel logo


By | Joe Fay 18th September 2006 14:16

New VAT regime for Christmas

HMRC promises light touch for honest late starters

Traders in a broad range of electronic goods have three months to overhaul their systems ahead of a VAT shakeup designed to crack down on missing trader fraud.

HM Revenue and Customs earlier this year asked the European Union for permission to move to a reverse charge system for VAT on items such as mobile phones and computer chips to stem a rising tide of VAT fraud. Under this scheme, VAT is not charged till the final link in the trading chain, removing the opportunity for fraudulent VAT refunds in the intervening stages.

UK authorities are still waiting for the final OK from Brussels, but reckons it will be ready to implement the new system from December 1. It is warning traders now so they can update their own systems.

HMRC said it was working with software vendors to ensure accounting packages and the like are updated in time. At the same time, it said, not all businesses are likely to be ready for the change, and some “manual workarounds” will have to be expected. For its part, the HMRC said it was prepared to exercise a “light touch” when it came to penalties for temporary non-compliance where there is no evidence of revenue loss, or fradulent activity.

Missing trader fraud is claimed to be costing the UK's coffers as much as £5bn a year.

If the bulletin detailing the changes is anything to go by, practically everyone handling IT chip will be affected.

“Who needs to read this?” the bulletin says, before saying:

  • Businesses buying and/or selling any of the following goods:
  • 1. mobile telephones,
  • 2. computer chips/microprocessors/central processing units,
  • 3. electronic storage medium which may be used in, or in connection with, computers, or any device in categories 1 and 4,
  • 4. electronic devices used for the storage, processing or recording of electronic data as follows:
  • a) handheld devices for recording or playing of sound and or images,
  • b) handheld computers,
  • c) handheld communication devices other than mobile telephones,
  • d) positional determination devices for GPS system,
  • e) games consoles with screen, or of a kind used with a television or computer

So, nothing to worry about if you're the UK's largest punch card supplier then.®

alert Send corrections


George Osborne, photo: HM Treasury
shutterstock_183801788_container ship

Chris Mellor

The SAN growth glory days are well and truly over, so where next?

Tom Whipp

Insurance industry insider tells all
Crypto fingers


Michael Dell. Pic by Joi Ito
Cool Texas dude is just your average billionaire
The Seeing Eye by Valerie Everett, Flickr, CC2.0
Follow the money – or, at least, our projections
Boats storm girl photo via Nikolina Mrakovic
The puppets from Team America: World Police gather at a bar for drinks.