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October 29, 2009
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Travel group offers solution on EU VAT cross-border rule change




HRG has presented HM Revenue and Customs (HMRC) with its answer to the ongoing challenges created by the cross-border rule change under the new European Union (EU) VAT directive.

The global travel group has informed HMRC of its intention to adopt the general place of supply rule for hotel bookings, which will lead to simpler administration for both itself and its clients.

The EU place of supply of services rules determine in which country a service is liable to VAT. The proposed amendment, which comes in to effect on 1 January 2010, could be interpreted as meaning that travel management companies would need to become VAT registered in multiple European countries and charge foreign VAT to clients.

Clients would need to then try and reclaim the VAT from that foreign tax authority, potentially increasing the real cost of the service. HRG’s interpretation would remove all of the above and mean the client was charged just the one country’s VAT on the service.

HRG first identified the challenges the rule change will create back in 2007. Since then, the company has been at the forefront of an industry-wide move to lobby the UK tax authorities and the European Commission to bring about a workable solution.

“We have proactively taken the only sensible, pragmatic and technically sound approach to this challenge, which is to apply the general place of supply rule,” said Chris Gibson, director of taxation at HRG.

“While we recognise that many other sectors of industry and commerce may also be affected by the new rules, the business travel industry will suffer a disproportionately damaging impact. Of course, we cannot assume that this would be the intention of the rule changes, which have been promoted by both the Commission and tax authorities in general as being aimed at simplification.

“Most importantly for us, our solution enables us to continue to look after the very best interests of our clients, as it means that they will not have to face the complexity of multi-jurisdictional VAT charges and tax invoices,” he continued.

“In addition, our position is consistent with the Commission’s objective of simplifying VAT administration for business-to-business transactions, not only for us and other businesses but also for the tax authorities of the member states as well.”


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