Following negotiations with other European Community member states the UK Government has decided to implement the reverse charge accounting mechanism on mobile phones and computer chips with effect from 1 June 2007. HMRC are restricting the new rules to mobile phones and integrated circuit devices. Blackberry’s fall within the definition of a mobile phone and will come within the scope of the reverse charge rules.

The implementation of the reverse charge accounting is designed to counteract 'Missing Trader' fraud, which we have previously reported on in enews. ‘Missing Trader’ fraud is a sophisticated and organised criminal attack on the VAT system. The fraud arises through contrived transaction chains involving supplies of high value goods with the tax loss occurring when the VAT charged by the supplier is not paid to HMRC but can be reclaimed by the recipient.

The legislation for the reverse charge procedure was introduced in Finance Act 2006 whereby the VAT registered customer, rather than the seller, will have to account for and pay the VAT on the supply of these goods.

Although the legislation was introduced in Finance Act 2006 it has taken some time to implement due to difficulties in the negotiations with other member states on the change in law in other countries to introduce the charge.

If you would like any advice on the implementation of the new rules please get in touch.

Internet Link: HMRC VAT Brief and VAT Information sheet