VAT legislation never seems to stand still, so as a business owner this means keeping up to date with the latest changes. You may have read something online or in the press referring to the VAT “Moss” Scheme?
Moss stands for the “Mini One Stop Shop” and could affect your business if you supply any digital services to any consumers (private individuals and non-business entities e.g, public authorities or charitable bodies) in the EU. So therefore, if you are a UK business and provide digital services to non-business customers this new legislation will affect you. This change applies even if your business is under the current VAT threshold of £81,000. If your business falls into this category you will not have to charge UK VAT on your sales to UK consumers. But you will have to account for VAT on relevant digital services to EU customers outside the UK as there is no minimum threshold.
From 1 January 2015, HMRC have implemented “place of supply rules” for value added tax (VAT) on the supply of digital services by businesses to consumers in the EU. The place of supply rules can be quite complicated, but simply put:-
The place of supply is the place where a supply is made and where VAT may be charged and paid.
Specifically under the new rules, HMRC state that:-
“VAT on digital services will be paid in the consumer’s country, not the supplier’s country. It will be charged at the rate that applies in the consumer’s country.”
But what do HMRC mean by digital services?
HMRC currently do not give a comprehensive list as the digital sector is one of the fastest evolving sectors in the world. But HMRC give us a broad brushstroke explanation:-
“Digital services’ includes:
- broadcasting – the supply of television or radio programs
- telecommunications – fixed and mobile telephony, fax and connection to the internet
- e-services – video on demand, downloaded applications (or ‘apps’), music downloads, gaming, e-books, anti-virus software and online auctions
So now you know if you need to make changes to your VAT reporting, how does a business account for the VAT?
UK businesses supplying digital services to non-business customers in other EU member states will have to charge and account for the VAT according to the local VAT rules of the customer’s member state. As there are up to 27 EU member states, the logistics of registering to pay VAT in multiple countries seems a huge undertaking, but that’s where the new VAT Moss scheme comes in.
Once a business has registered for the scheme, you submit a calendar quarterly MOSS VAT Return and single VAT payment to H.M Revenue & Customs. HMRC will then forward the relevant parts of your return and payment to the tax authorities in the member state(s) where your consumers are located.
Although this change primarily affects businesses based within the EU, businesses predominantly based outside the EU but who have established a business in the EU as a way to meet their obligations to account for VAT will now have to review those arrangements. These businesses will have to register for Non-Union VAT MOSS scheme which replaces the old VAT on Electronic Services (VoES) scheme.
As with all types of VAT legislation, although you can summarise there is so much detail and many criteria that must be met. Information such as when you need to register is important.
We would therefore advise you contact a member of the WHA team to review your circumstances right away and see if the changes in legislation apply to your business.
