The United Kingdom has announced plans to eliminate its “use and enjoyment” provision for VAT on business-to-consumer (B2C) telecommunications services used outside of the European Union. Schedule 4A of the VAT Act of 1994 currently treats telecommunication services used outside of an EU member state as taking place where consumed, even if the service would otherwise be taxable in the UK. Absent this “use and enjoyment” rule, B2C telecommunications services will be sourced to the billing address of the customer. The UK currently sources telecommunication services used within the EU to the billing address of the customer; the proposed amendment to the VAT Act will apply the same treatment to such services used outside of the EU.
There are large implications for both private consumers and suppliers of telecommunication services. If a private consumer uses his or her mobile phone to make a call while visiting Canada, the roaming charges, which previously were not subjected to VAT, will now have VAT assessed on the call.
The new change will effect services made on or after November 1, 2017. The change will bring the United Kingdom into line with international standards and will reduce inconsistencies in VAT assessment for telecommunication services.
