BN 46 - Introduction of a Change of the Person Responsible for Accounting for and Paying the
VAT on the Sale of Certain Goods

Who is likely to be affected?

  1. Any business selling or purchasing specified goods such as mobile phones, computer chips and some other similar electronic items.

General description of the measure

  1. This measure introduces a new legal provision to combat Missing Trader Intra Community (MTIC) fraud in goods such as those referred to above. It changes the person who is liable to account for and pay the VAT on the sale of such goods. Normally the seller of the goods accounts for and pays the VAT chargeable on the sale but this change, when implemented, will require any VAT-registered business purchasing certain goods, which will be specified in secondary legislation, to do so instead. It also introduces a consequential change allowing adjustment of the VAT on the sale when full payment in relation to it has not been made within 6 months.

Operative date

  1. It will come into effect at a future date once we have agreed the proposal with other European Union Member States.

Current law and proposed revisions

  1. A new section 55A of the Value Added Tax (VAT) Act 1994 is being introduced which specifies the person who is liable to account for and pay the VAT on the sale of certain goods. The new section enables the introduction of secondary legislation to specify the goods to which the section will apply and to specify certain excepted supplies. It also makes provision for the purchase of certain goods to which the section will apply to be included in the taxable turnover of a person for VAT registration purposes. A new section 26AB is also being introduced to allow for an adjustment of output tax (as the bad debt relief scheme will not apply) where entitlement to input tax is disallowed under section 26A of the VAT Act 1994.
  2. The secondary legislation is not yet available but will set out in detail the goods to which the reverse charge will apply and will specify certain excepted supplies.

Further advice

  1. If you have any questions about this change, please contact the National Advice Service on 0845 010 9000.