RCB/1/16 VAT—domestic reverse charge for businesses wholesaling telecommunications services
Revenue & Customs Brief, Issue 1. 15 January 2016
The government has laid legislation, in the form of a statutory instrument, to introduce a reverse charge accounting mechanism (domestic reverse charge) for wholesale supplies of telecommunications services in the UK. This is in response to the threat of missing trader intra-community fraud in those supplies.
The purpose of this brief is to provide guidance on how the domestic reverse charge will operate. It should be read in conjunction with VAT Notice 735 “VAT domestic reverse charge on specified goods and services”.
2 Who should read this brief
Businesses that buy or sell wholesale telecommunications services in the UK, including—
— airtime carriers
— network operators
— message hubbing providers
— short messaging service (SMS) and voice aggregators.
A domestic reverse charge means the customer receiving the wholesale supply of telecommunications services must account for the VAT due rather than the supplier. In turn the customer deducts the VAT due on the supply as an input, meaning no net tax is payable to HM Revenue and Customs (HMRC). This removes the scope to evade any VAT owing to HMRC.
The UK has introduced similar measures, in response to criminal threats, for mobile telephones, computer chips, emissions allowances, gas and electricity.
4 Timing and scope of implementation
The reverse charge will take effect from 1 February 2016 and will apply to the wholesale buying and selling of telecommunications services in the UK, subject to certain exceptions.