EU VAT Invoicing Directive - new UK regulations in 2013

The UK VAT office’s Technical Note issued at the end of May is a timely reminder for businesses to prepare themselves for invoice regulation changes which will require to be effective from 1 January 2013. The changes, which will be implemented across the EU through all Member States, are based on the EU Directive 2010/45/EU. The aim of the directive was to reduce VAT invoice administrative burdens and simplify processes. Also it was to remove obstacles in the use of electronic invoicing.

Electronic invoicing’s clear advantages have resulted in its increasing use over recent years, but EU countries have applied different requirements e.g. electronic signatures and EDI (Electronic Data Interchange). The new rules require Member States to allow electronic invoicing free of conditions. The only imposable constraint is that the transaction customer should fully agree to its use by its supplier.

Exempt service supplies made in UK have been allowed to be made without the issue of an invoice, but this has not been the case in other Member States. The changes to be effected in 2013 will now allow exempt supplies to other EU countries without the need for an invoice.

Simplified invoices are currently allowable in the EU for small value transactions. In the UK, they have been used within the retail sector, but now any VAT registered business can use this facility when making supplies to another taxable person. The transaction must not exceed a value of £250, the current UK limit already agreed. It should be noted that this limit is different in other countries and the Council Directive sets a standard level maximum of €100 (or equivalent) unless otherwise ratified by the Council.

Explanatory references in the case of cash accounting, exempt supplies, margin schemes, self-billing, reverse charge, have been required under existing rules. Member States have had a freedom to impose their own requirements including references to EU Directives and their own relevant tax regulation. Now, under the new Directive, it is intended that Member States introduce a simple set of terms e.g “exempt”, “margin scheme-tour operators” , “reverse charge”. Language would be the only issue in the way of universal understanding.

There are also other changes including the new Art. 222 of the Directive, which requires EU businesses to issue intra-community invoices for supplies by the 15th of the month following at latest.