New EU VAT rules could add to admin burden

5 January 2010

UK firms could face additional administrative costs as a result of changes to the EU’s VAT rules.

The new rules, which came into effect on 1 January, mean that firms that trade across EU borders must put together lists each quarter setting out details of the services that have been supplied to VAT-registered EU customers.

Under the old rules, only customers to whom goods were supplied had to be listed.

The aim of the information is to help EU tax authorities spot possible cases of VAT fraud.

The concern, however, is that the changes will create extra paperwork and add to administrative costs, especially for smaller firms.

Businesses could be charged penalties of £15 a day if they are late in filing the details.

Stephen Alambritis of the Federation of Small Businesses said: “We would urge the government to look at this regulation and make sure that we are not gold-plating the European requirements. In a year that is all about recovery, it is important that we don’t stall it by landing more paperwork on small businesses.”

HM Revenue and Customs (HMRC) has suggested that it will provide firms with some leeway on implementing the new regulations during the initial introduction period.