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Business Tax Changes for the UK 2015

You may have heard the news that the way VAT (Value Added Taxation) is charged to companies based in the UK is changing. Those earning revenue through online trading need to pay VAT to the EU member state where the customer lives, as opposed to the previous system where the company paid the VAT from the country they chose to supply the goods or services from.

It is worth deciding if your firm needs to make a note of any new requirements. The government introduced changes specifically applying to anyone supplying telecommunications, broadcasting products and e-services. Below is a short summary of what to look out for, courtesy of HM Treasury and Customs.

VAT Changes – new supply rules and the introduction of the VAT Mini One Stop Shop (MOSS)
The new VAT rules apply to UK businesses from 1 January 2015. Some compliance issues worth considering are:
• Compliance option 1 – the main compliance issue each business will need to ask itself, is does it want to register for VAT, separately, in each Europe member state. This applies if they have a consumer, or non-VAT registered customer that is resident in that state.
• Compliance option 2 – Businesses can choose to apply for the mini one-stop shop (MOSS) option, which means the scheme simplifies VAT responsibilities into customer groupings by EU member state.

Under either scheme, a business will need to know the individual EU VAT rates in each member state they are trading in, and the particular rules that apply there.

Businesses need to be aware they are subject to an audit from that member state.

Systems and Processes Will Change for Business Account-keeping and VAT
Businesses will need to identify exactly where their customers are located. For many, this will mean a complete overhaul of record keeping systems. How customers are managed, means improved technology systems, which can take hold of large amounts of data. Part of the process of doing business may mean a business needs to enable more server space, for example.

New ways of storing customer information, and the increased details needed, mean a business will need to get this checked out by a legal team. If working in a B2B environment, this could lead to needing to negotiate new trading terms with suppliers.

Ways of invoicing customers will need to change. Member state invoices need to be in the language of the customer’s country, and with the corresponding local taxation and VAT information clearly displayed.

Commercial Issues around Pricing
For a business, deciding how to apply VAT in the past would mean adding a percentage value wherever the VAT applies. Obviously, each product or service will attract a different percentage VAT addition, depending on where the customer lives.

Pricing can be applied on an individual member state level, known as dynamic pricing, yet a business will need a good technology algorithm to apply the variations needed for auto-calculations to be accurate every time. It may be the case, a business will need to think about their customers at the point-of-sale. Do they need to fill out a bit more information, and if so, do contact and order forms need adjustment?

Another option is to go for a blended rate, or universal pricing, which gives uneven margins, but to the business provides an acceptable level of profit. This may be the preferred method of pricing.

Issues over pricing may cause a business to relocate, if many customers are in a certain EU state where VAT is lower than their current location.

Click here for a list of Accounting Services in the UK.


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