EU ministers struggle with Reverse Charge

Little progress made on joint European Reverse Charge initiative at informal meeting

HM Revenue and Customs (HMRC) is looking increasingly out on a limb over its Reverse Charge anti-VAT fraud scheme, after the idea of a joint European Reverse Charge initiative was scorned at an informal meeting of European finance ministers.

The European Union (EU) Ecofin committee is due to meet next month to formerly discuss the strategy further, but German finance minister Peer Steinbrueck, whose country holds the EU’s rotating presidency, said recently there was “no chance” of a deal between EU member states on Reverse Charge proposals “as they currently stand”.

Reverse Charge, which transfers the onus for VAT onto the purchaser rather than the seller, is coming into force on 1 June in the UK in the mobile phone and computer components industry, after HMRC managed to get approval at an Agriculture and Fisheries council meeting earlier this year (CRN, 26 March).

An HMRC representative told CRN: “The UK is taking an active role in EU discussions on finding community-wide solutions to tackling VAT fraud such as improvements to the current mutual assistance arrangements or more fundamental solutions such as a wide Reverse Charge. Germany and Austria had proposed a wide Reverse Charge, but the UK would not wish to apply a wide Reverse Charge that has the potential

to turn VAT into a sales tax and could lead to significant additional revenue losses and administrative burdens.”

Keith Warburton, chief executive of the Professional Computing Association (PCA), which is holding a seminar explaining the impact of Reverse Charge on the UK IT industry this Wednesday, said: “The biggest problem is intra-community fraud, and if the rest of the EU is not following the UK’s lead on this, what is the point?”

One UK trader, who asked to remain anonymous said: “The whole situation seems to be a political game and is very confusing.”