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Eversheds comment: Prompt payment VAT loophole closure brings UK into line with Europe

  • United Kingdom

    20-03-2014

    Commenting on a VAT measure in relation to prompt payment discounts announced in yesterday's Budget, Giles Salmond, taxation expert at global law firm Eversheds, says:

    "This measure is designed to fill a perceived loophole in UK VAT law whereby certain B2C operators, achieved a VAT benefit by offering customers the option to either pay upfront on let’s say £100 for 12 months of services, or pay a higher amount, say £12 per month. Most customers would typically opt for the monthly charge rather than paying £100 upfront. Since the supplier has offered customers a discount for prompt payment they only account for VAT on the lesser amount even though customers typically pay the higher monthly amount.

    "This could represent a considerable VAT saving and the new rules are designed to stop this and to bring UK law more clearly into line with EU VAT rules. The changes will apply from 1 May 2014 for suppliers of telecoms and broadcasting services, while other businesses have until 1 April 2015 to adopt the changes."

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