Yesterday, the European Commission (EC) launched its plans for a standard VAT return for all businesses. This includes requiring all companies to file monthly VAT returns. Currently, almost all UK businesses file their VAT returns on a quarterly basis – so will have to complete 12 tax filings per year instead of the current four.
The new measure will come into place from January 2017.
EU aims to save €15bn in red tape
One of the most common complaints of companies doing business across Europe is the variations in formats and frequency of VAT reporting between each member state. To overcome this, after a year-long consultation, the EC has put forward a new format to be adopted across the Union. This will reduce the number of boxes requiring completion, and help businesses completing returns in more than one country (approximately 13% of EU businesses). All business with a turnover above €2 million (£1.7m) will have to submit VAT returns on a monthly basis.
The EC estimates this will save EU businesses €15 billion per annum.
UK to lose out
Whilst most EU countries currently require monthly filings, the UK is one of the few exceptions in obliging VAT registered companies to file on a quarterly basis. This will mean most companies will have to file 12 returns instead of the current four.
Richard Asquith, Head of Tax at TMF Group, commented: “A simplified VAT return for all of Europe is a sensible idea, but it will dramatically increase reporting frequencies, and therefore costs for all but the smallest of UK businesses. Aside from the extra manpower, companies will have to go through an extensive re-engineering of their IT and accounting systems.”