VAT news

Date of change to telecommunications use and enjoyment rules announced.

Gareth Bevan 25 July 2017 No comments

Further to our earlier blog post HMRC has now issued a policy paper VAT: telecommunication services used outside the EU – use and enjoyment rule removed. The effective date of the change is 1 November 2017.

Effect of the change

This change alters the VAT rules for mobile telecommunication services supplied to UK non-business users (for example, private consumers) when they use their mobile phones outside the EU. The change means that from November UK VAT will be charged on roaming services used by UK consumers outside the EU.

Current rules

Currently UK VAT is charged when UK consumers use their mobile phones within the EU (including the UK) but, because of the ‘use and enjoyment’ rule, it isn’t charged when they use them outside the EU. This is because mobile phone use in the EU is treated as taking place where the customer lives, whereas use outside the EU is treated as taking place where the service is consumed.

For example, a call made by an individual who lives in the UK on their mobile while on holiday in the USA isn’t currently subject to UK VAT as the supply is treated as taking place (being used and enjoyed) in the USA.

Why the change is being made

The intention of this change is to resolve the inconsistency between the taxation of mobile phone use in the EU and that applied outside the EU. It will also bring UK VAT rules into line with the internationally agreed approach. In addition it means mobile phone companies will no longer be able to use the inconsistency to avoid UK VAT. HMRC have estimated that it will counter a threat to about £1 billion of revenue.

Please get in touch if you require further information on the new rules.