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The Reverse Charge accounting procedure was first introduced by HMRC to combat Missing Trader intra-community (MTIC) fraud, also know as carousel fraud, in business-to-business (b2b) transactions in the United Kingdom. It applies when a supply of mobile telephones or computer chips exceeds the HMRC de minimis level of £5000, exclusive of VAT. In this situation the buyer rather than the seller must account for the Output VAT to HMRC. Full details of the procedure are available on the HMRC web site.
A report called the Reverse Charge Sales List (RCSL) has been added to the System - Maintenance - VAT Processing form. This report is designed to be submitted electronically via the HMRC web site and the Government Gateway. Once you declare to HMRC that you need to use the Reverse Charge accounting procedure, the RCSL must be submitted to HMRC for each VAT period, even when no Reverse Charge supplies are traded.
Important: Supplies to customers in the United Kingdom who are not VAT registered are unaffected by Reverse Charge accounting; as the supplier you must account for the output VAT in the normal way.
For the purpose of the reverse charge, mobile telephones include:
Any handsets that have a mobile phone function (i.e. the transmitting and receiving of spoken messages), whether or not they have any other function - it therefore includes other communication devices, such as Blackberrys.
Mobile phones supplied with accessories (such as a charger, battery, cover or hands-free kit) as a single package and Pay As You Go mobile phones.
The reverse charge does not apply to the following:
Mobile phones that are supplied with contracts for air time.
Mobile phone accessories which are supplied separately from a mobile phone.
3G data cards or Wi-Fi cards.
As a guide, all computer chips covered by the reverse charge fall within the tariff commodity code 8542 3190 00. The term covers the following:
Small integrated circuits (Central Processing Units or CPUs)
Discrete integrated circuit devices (Microprocessors or Microprocessor Units - MPUs)
Microcontrollers or Microcontroller Units (MCUs)
Chipsets - the dedicated cluster of integrated circuits that support MPUs.
The reverse charge applies to such items when they are in a state prior to integration into end user products. Items such as computer servers, laptops or desktop units are excluded from the scope of the reverse charge.