Rickie Lowery considers the VAT domestic reverse charge and some issues advisers need to be aware of when deciding whether it applies to a client as supplier or customer and if so how it affects the client.
When it comes to VAT, there are numerous high-risk industries (e.g., the computer chip and mobile phone sectors) which suffer from what is known as ‘missing trader fraud’.
At its most basic, missing trader fraud occurs when a business collects VAT from its customers but does not pay it over to HMRC, often accompanied by the business disappearing.
HMRC has steadily introduced legislation to counter this practice, and the latest addition to this was the domestic reverse charge (DRC) legislation, which took effect from March 2021.
Overview
In general terms, the rules apply:
-
where both the
