UK tax body reviews telecoms tax to combat VAT fraud

25 January 2016 |

UK’s HM Revenue and Customers (HMRC) is changing how telecoms operators are taxed in a move to combat value-added tax (VAT) fraud.

Starting Feb 2016, the tax, payments and customs authority will switch the responsibility for collecting VAT from the suppliers of wholesale telecoms services to their customers.

According to HMRC, the “domestic reverse charge” means the customer receiving the wholesale supply of telecoms 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 HMRC.

“We have acted quickly to close down the opportunity for fraud in the telecoms sector to ensure losses do not increase,” said the body. While there has been no sudden increase in VAT fraud, the “threat level has increased,” HMRC added. 

Noting that the timetable may be challenging for some businesses to meet quickly, HMRC said it will adopt a “light touch” approach to penalties relating to the new rules for six months.