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VAT ‘use and enjoyment’ rule removed for mobile phone services

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The Value Added Tax (Place of Supply of Services) (Telecommunication Services) Order, SI 2017/778, removes the ‘use and enjoyment’ rule in VAT legislation for supplies of mobile telecommunications services to non-business users when outside the EU, with effect from 1 November 2017. The change means UK VAT will be charged on all mobile phone services used outside the EU by UK consumers, bringing the UK rules into line with the internationally-agreed approach. EU place of supply rules for telecommunication services tax supplies in the country where the customer lives.

The government first announced this change at Budget 2017 and HMRC consulted on a draft of the order during April and May.

HMRC estimates the impact of the new treatment on a ‘typical’ UK customer will mean an additional £5 a year in charges. In revenue terms, HMRC says it has evidence that the change will protect around £1 billion from businesses able to exploit the ‘use and enjoyment’ rule.

Issue: 1364
Categories: News , Indirect taxes , VAT
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