On 1 February 2016 HM Revenue and Customs (“HMRC”) introduced emergency legislation to combat the threat of VAT fraud in the wholesale telecommunications sector.
These VAT changes only affect voice and related data services but do not affect service charges, access or line rental services. Voice call charges (including VOIP), data usage and text usage are all affected.
So if your monthly bill for usage charges from a supplier was £5000+VAT (£6000), it is now just £5000 and the £1000 of VAT you used to pay to your supplier, you now owe directly to HMRC.
This means your VAT liability may increase significantly but the days of delaying VAT payments to help cash flow are gone. HMRC penalties for defaults by even a day are onerous, as illustrated below;
|
Default |
Surcharge (if turnover is £150,000 or more) |
Surcharge period |
|
1st |
No surcharge but you enter a surcharge period |
12 months |
|
2nd |
2% (or no surcharge if it’s less than £400) |
12 months from the date of the most recent default |
|
3rd |
5% (or no surcharge if it’s less than £400) |
12 months from the date of the most recent default |
|
4th |
10% or £30 (whichever is more) |
12 months from the date of the most recent default |
|
5th or more |
15% or £30 (whichever is more) |
12 months from the date of the most recent default |
On the plus side if you normally pay your suppliers monthly you may enjoy a cash flow advantage because your VAT is due quarterly. If you opt to pay by Direct Debit you get a further 3 days before the money is taken from your account.
Given the penalties for defaulting this would seem like a very good idea.
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