At the BASDA Software Thought Leaders’ Summit May 2013 Tarlochan Lall, a Barrister from the Monckton Chambers and a member of The VAT Expert Group, provided an insight into upcoming VAT changes.

If you sell goods to other European businesses new policy is shaping up such that you will need to charge VAT at the rate of the destination state. This works as follows:

The supplier collects tax at rate(s) of destination countries The supplier pays tax to its home state. From an administration point of view the supplier needs to know both destination VAT rates + laws + practices.

As Tarlochan surmised in his presentation, chaos?

It should be noted that there are currently 7 solutions on the table and this is just one of them, although it is believed to be a forerunner.

Yes, there is a lack of trust between European states and as a result each individual state has its own agenda with setting its own VAT rates. That is not going to change and for domestic trade I am not suggesting it does.

But surely a simple solution to this problem would be to have a European wide VAT rate for inter European trade. When you sell to a European business you use a single European VAT rate and pay that to your home state. No need to know destination VAT rates + laws + practices.

Posted by Tim Fouracre

Tim founded Clear Books in 2008. Like many small business owners he worked from home for 15 months to get his startup off the ground. Today Tim enjoys helping Clear Books, its customers and its growing team innovate and achieve. Tim did his GCE O Levels in Ghana.

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