Domestic reverse charge ― wholesale trading in electricity, gas and electronic communication services and construction labour

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Domestic reverse charge ― wholesale trading in electricity, gas and electronic communication services and construction labour
  • Wholesale trading in electricity and gas
  • Electronic communication services
  • Supplies of building and construction services
  • Accounting requirements

This guidance note provides an overview of the changes introduced in Budget 2014 that affect certain supplies of electricity and gas with effect from 1 July 2014 and the introduction of the reverse charge in respect of electronic communications services with effect from 1 February 2016.

This note should be read in conjunction with the MTIC fraud ― application of the domestic reverse charge for mobile phones and computer chips guidance note which explains how the reverse charge works in respect of the supplies covered by the scope of the reverse charge anti-avoidance provisions.

Wholesale trading in electricity and gas

In Budget 2014, the Government announced that it was intending to implement changes to the way in which output tax is accounted for on wholesale supplies of electricity and gas within the UK. From 1 July 2014, the domestic reverse charge must be used in order to account for VAT due on these types of supplies in order to combat increasing MTIC fraud.

VATA 1994, s 55A; 2006/112/EC, Article 199a ; Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2014, SI 2014/1458; Value Added Tax (Amendment) (No 2) Regulations 2014, SI 2014/1497 (both subscription sensitive); Revenue & Customs Brief 23/14 ; De Voil Indirect Tax Service V3.233 (subscription sensitive); HMRC Notice 735 ; Revenue & Customs Brief 28/14 
Supplies included

The domestic reverse charge applies to all wholesale supplies of gas and electricity made between two UK parties unless the supply falls into one of the exemptions outlined below. This usually means a wholesale supply between two UK parties under trading contracts such as the European Federation of Energy Traders contracts, National Grid Master contracts, etc and over-the-counter or spot contracts where:

  • supplies of gas through a

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