VAT on transport - a simple tax!! (VAT on transport)

Member Name: fionajm

Product:	VAT on transport
Date:	03/01/02 (1623 review reads)
Rating:

Advantages: Rules to follow

Disadvantages: Difficult to follow the rules

In the early 70's the UK first footed (how apt) into Europe and in so doing took on board Value Added Tax. It was a pre-requisite to our entry and was sold to us in the UK as 'a simple tax'. So in we went and in came VAT. Lets hope the Euro is more straight forward! I nearly put this in a soapbox op, but my op lends itself equally well here I feel.

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I write this as I get my head round transportation services and what VAT liability I should be paying, and question why things should be so difficult when it comes to taxation. But arguably there are VAT simplifications at hand for all the businesses out there who need a hand on this very tricky point, but boy are they hard to get your head round too! Please, please re-write the EC VAT law it is far to complicated as my traumas demonstrate... my plea to European Commission accountants starts here!

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So... it goes a little something like this:

Transport services

The first point to mention is that although transport services do not feature in Article 9(2)(e) of the Sixth Directive, which is that part of the European VAT legislation which details the reverse chargeable supplies of services, in practice there are simplifications in place which mean that when we "import" supplies of services relating to the transport of goods within the EU, we do account for the reverse charge on those supplies. For those of you out there who don't know what I'm on about (which I am sure will be most!), the reverse charge procedure basically says that for certain services you as a VAT registered business will not be liable to pay European/rest of world VAT and suffer distorted competiton -in so doing the reverse charge you can 'self account' the VAT which means unless you are a finance institution or not VAT registered (plus a few others) then you will have a nil net VAT affect... but I won'
t go into that here as you will get your heads in a tiz.

However, no reverse charge liability arises in relation to transport services relating in any part to the non-EU movement of goods.

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I've listed a number of different possibilities below - I had to just to
get things straight in my head! Hope you find it useful if you are a business out there in the same situation.

1. UK domestic supply of transport services, not part of an EU or non-EU
movement

a. if supplier, and customer located in UK - standard-rated (17.5%).

b. if supplier in UK, customer elsewhere in EU - standard-rated.

c. if supplier in UK and customer outside the EU - standard-rated

d. if supplier in EU and customer in UK - zero-rated by supplier, provided
customer UK VAT-registered, with customer accounting for the reverse charge as above. Otherwise standard-rated.

e. if supplier and customer in EU:
(i) same member state - standard-rated.
(ii) different member states - standard-rated

f. if supplier in EU, customer non-EU - standard-rated

g. if supplier outside EU, customer in UK - zero-rated by supplier, provided customer UK VAT-registered, with customer accounting for the reverse charge.Otherwise standard-rated.

h. if supplier outside EU, customer in EU - standard-rated

i. if supplier and customer outside EU - standard-rated

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Phew!
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2. UK domestic supply as part of an EU movement of goods:

a. if supplier and customer located in UK - standard-rated.

b. if supplier in UK and customer elsewhere in EU - if customer registered for VAT in another member state, zero-rated by the supplier and reverse chargeablable by the customer. Otherwise standard-rated.

c. if supplier in UK and customer outside the EU - standard-rated


d. if supplier in EU and customer in UK - zero-rated by supplier, provided
customer UK VAT-registered, with customer accounting for the reverse charge. Otherwise standard-rated.

e. if supplier and customer in EU:
(i) same member state - standard-rated.
(ii) different member states - zero-rated by supplier,provided customer VAT-registered, with customer accounting for the reverse charge. Otherwise standard -rated.

f. if supplier in EU, customer non-EU - standard-rated

g. if supplier outside EU, customer in UK - zero-rated by supplier,provided customer VAT-registered, with customer accounting for the reverse charge.
Otherwise standard-rated.

h. if supplier outside EU, customer in EU - zero-rated by supplier,
provided customer VAT-registered, with customer accounting for the reverse
charge. Otherwise standard-rated.

i. if supplier and customer outside EU - standard-rated.

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3. UK domestic supply as part of a non-EU movement of goods:

a-i: all zero-rated, no reverse charge liability.

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4. EU or non-EU supply as part of a non-EU movement of goods:

a-i: all outside the scope of UK VAT, no reverse charge liability.

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Phew again!! Anyway less of that!!
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Where we have supplies within other EU member states which are similar to
the above four categories, then as a general rule the VAT treatment within
the particular member state will follow the UK treatment.

For example, a French domestic supply of transport with no EU or non-EU movement would have the same treatment in France as that listed under category 1 above in the UK. However, if we ever have a dispute on the liability of any transport services provided in a non-UK EU m
ember state, I would recommend looking at the liability in isolation, because as you are aware sometimes different sates apply different VAT treatments to the same supplies for no
obvious reason. (For example, there is no basis in European law that I can see for the UK treatment in category 2 where the reverse charge is
applied).

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The reverse charge in general
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The UK legislation here is actually broader than the EU legislation. If
looking solely at the UK, then the reverse chargeable supplies are listed
at Schedule 5 of the 1994 VAT Act. The European legislation which lists
those supplies which should be reverse chargeable are listed at Article
9(2)(e) of the Sixth Directive, but if you require information on any
particular country, let me know, because it's possible that other countries
have introduced "simplifications" similar to the UK and I'll do an op on that one too (I'm getting helpful in my old age).

So who said VAT was a simple tax... any chance of a legislative re-write any European Government accountants out there because I've got a headache!!! I tis quite clear that VAT is not a simple tax and the small business, and the large need assistance on this minefield.

Will they get it.... we shall have to wait and see!

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