Owing to the threat of intra community missing trader fraud the UK government has drawn up a statutory instrument to introduce the reverse charge mechanism for accounting for value added tax (VAT) on wholesale supplies of telecommunications services in the UK. Businesses buying or selling wholesale communications services include network operators; message hubbing providers; short message service (SMS) or voicing aggregators; and airtime carriers. Revenue and Customs Brief 1 (2016) sets out the details of the measure which is effective from 1 February 2016.

The customer receiving the supply of telecommunications services rather than the supplier will need to account for VAT on the supply. As the customer will record both input and output tax on the transaction no additional VAT will be payable but the scope for missing trader intra-community fraud will be removed. HMRC will adopt a light touch approach to penalties for businesses attempting to comply with the legislation but experiencing difficulties with adapting their procedures.

Wholesale supplies for the purpose of this measure are supplies between carriers of telecommunications services or supplies of these services to network operators for onward supply to the consumer or user of the underlying service. Excluded from the measure are non-wholesale supplies; broadband and other transmission-only services; supplies for final consumption; supplies to a member of a corporate group for onward supply within that corporate group, where the group members consume that supply; and businesses not registered or liable to be registered for VAT.

There is no de minimis rule excluding supplies so the domestic reverse charge applies to all supplies of electronic communications services apart from supplies specifically excluded from the measure.