New rules affecting ECSLs and IC services

Changes to EC Sales Lists, proposed from 1 January 2010, have now been crystallised following the EU Council’s adoption of Directive 2008/117/EC and Regulation (37/2009) on 16 December 2008.

HMRC has published guidance as to how the changes affecting ECSLs will be implemented in the UK as follows:

* ECSLs relating to services may be submitted quarterly, relating to calendar quarters.

* From 1 January 2010, ECSLs relating to goods may be submitted quarterly, relating to calendar quarters, provided that the value (excluding VAT) of supplies of goods to other Member States has not exceeded £70,000 in any of the previous 4 quarters.

* A business entitled to submit quarterly ECSLs for goods can continue to do so unless the value of supplies of goods to other Member States exceeds £70,000 (excluding VAT) per quarter from 1 January 2010 to 31 December 2011 or £35,000 (excluding VAT) per quarter from 1 January 2012 onwards.

* If a business exceeds the quarterly goods threshold by the end of the first or second month in a quarter, an ECSL must be submitted at the end of that month, covering the month or months in that quarter. Lists must be submitted monthly from then.

* Once a business is on a monthly cycle, because it has exceeded the threshold in any quarter, it must continue to submit monthly ECSLs for goods until the value of its intra-Community trade in goods has been below the threshold for five consecutive quarters – it may then revert to quarterly submission if its trade remains below the threshold.

* A business required to submit monthly ECSLs relating to goods may still submit ECSLs relating to services quarterly.

* Any business may submit ECSLs for goods and/or services monthly, if it wishes.

* UK businesses and HMRC must fulfil their ECSL obligations within one month (reduced from three).

The changes affecting time of supply of services supplied to businesses in other Member States where the reverse charge applies are as follows:

* it will be the earlier of when the service is completed or when payment is made;

* for continuous supplies of services, it will be linked to the end of each billing or payment period, but where no invoice or other accounting document is issued or payment made during the year, it will be the end of each calendar year.

The new rules not only determine when VAT is payable but also when the services must be recorded on an ECSL.

HMRC are consulting businesses on the above to ensure the changes can be implemented in the easiest and least burdensome way (see HMRC Brief 02/09, issued 26 January 2009).