The Value Added Tax (Section 55A) (Specified Goods and Services and Excepted Supplies) Order 2010

EXPLANATORY NOTE

(This note is not part of the Order)

This Order, which comes into force on 1st November 2010, revokes and replaces the Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2007 (“the Revoked Order”). Its effect is to apply a reverse charge to specified goods and services of a kind used in missing trader intra-community fraud.

Council Directive 2006/112/EC (OJ No L 347, 11.12.06, p1) (“the Principal VAT Directive”) establishes a common system of value added tax applicable throughout the European Union. As a general rule the Principal VAT Directive requires the supplier of goods or services to account for the VAT due on them. In certain circumstances the VAT may instead be accounted for and paid by the VAT registered recipient of those supplies. A charge to tax in these circumstances is referred to as “a reverse charge”.

The United Kingdom is permitted, until 30th April 2011, to derogate from the general rule in order to apply a reverse charge to supplies of goods of a kind used in missing trader intra-community (“MTIC”) fraud, namely mobile telephones and integrated circuit devices. This derogation is permitted by Council Decision 2007/250/EC (OJ No L 109, 26.4.07, p 42) as amended by Council Decision 2009/439/EC (OJ No L 148, 11.6.09, p 14).

The Principal VAT Directive was amended by Council Directive 2010/23/EU (OJ No L 72, 20.3.10, p 1) by inserting Article 199a which permits member States, until 30th June 2015, to apply a reverse charge to the transfer of allowances and other units that are recognised for the purposes of the European Union greenhouse gas emission allowance trading scheme “the EU ETS scheme”). These supplies are treated as supplies of services for the purposes of VAT and are of a kind used in MTIC fraud.

Section 55A of the Value Added Tax Act 1994 (customers to account for tax on supplies of goods or services of a kind used in missing trader intra-community fraud) (“section 55A”), as amended by section 50 of the Finance Act 2010 (c. 13), provides that supplies of goods and services which, pursuant to powers provided for in that section, have been specified in a Treasury Order, shall be subject to a reverse charge.

By specifying (with certain exceptions) mobile telephones and integrated circuit devices as goods to which section 55A applies this Order reproduces the effect of the Revoked Order. In addition it specifies that transfers of allowances and other units that are recognised for the purposes of the EU ETS scheme are services to which section 55A applies.

Article 2 revokes the Revoked Order.

Article 4 provides that goods and services specified in articles 5 and 6 are goods and services to which section 55A applies.

Articles 5 and 6 respectively specify the goods and services to which section 55A applies.

Article 7 makes provision for certain types of supplies of specified goods to be excepted from the effect of section 55A.

Article 8 limits the application of one of the exceptions provided for in article 7.

A full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen.

A transposition note explaining how Article 199a of the Principal VAT Directive is transposed into UK law is annexed to the Explanatory Memorandum which is available alongside this Order on the OPSI website (http://www.opsi.gov.uk).