HMRC did such a good job in publicising the VAT MOSS changes effective from 1 January 2015 that many unaffected businesses have sat up and are asking what it means for them! If you’re still trying to figure out if the VAT MOSS change applies to you, here are some clarifications.
VAT MINI ONE-STOP SHOP (“MOSS”) applies solely to supplies of digital services to EU private consumers. So what are “digital services”? HMRC gives the following as examples of digital services:
- Broadcasting TV or radio programmes
- Telecommunications – fixed and mobile telephony, fax, connection to the internet
- E-services – video on demand, downloaded apps, music downloads, gaming, e-books, anti-virus software and online auctions
HMRC stresses that this list is not exhaustive and cannot be in such a fast-developing sector. However, digital services must be of a kind that can be supplied without significant human intervention. For example, communication by email does not make professional services “digital”.
What has changed?
The old system made these services subject to VAT in the country where the supplier was based. For example, a UK supplier providing videos on demand to private individuals in France or Spain would have to charge UK VAT at 20%. By contrast, a supplier based in Luxembourg would only have to charge VAT at 15%.
Under the new system, the place of supply shifts to where the consumer is based. So, in the previous example, both the UK and Luxembourg suppliers would now have to charge VAT in France and Spain, and apply the VAT rates in those countries. The new system gives a B2C supplier of digital services two options. It can either: (a) Register in each country where it has private customers; or (b) Register in one country using the VAT Mini OneStop Shop (“MOSS”).
Take the UK supplier in our example again. It could register in France and Spain. Alternatively, it could use the VAT MOSS and just make a quarterly return to HMRC. HMRC would then send the relevant parts of the return, along with any payments, to the tax authorities in France and Spain.
HMRC has recognised that there will be some UK businesses that are below the UK VAT registration limit (currently £81,000) who make supplies of digital services to private customers in other EU countries. Such UK businesses may register just for their crossborder sales and use MOSS. They do not then account for VAT on their UK supplies, or claim VAT on the purchases relating to those sales, until they exceed the VAT registration threshold. In addition, the changes do not affect those who sell through a third party platform or marketplace.
B2B cross-border compliance
Little has changed here since our September 2012 Update (for a copy, please get in touch). However, the intrastat arrivals threshold now stands at £1,500,000.
If you need more advice on this or any other VAT issues, please feel free to contact Terry Dockley & Co who take the sting out of VAT!
10 Rectory Close
Newbury RG14 6DE