RW VAT Services – Guide to VATMOSS
January 2015
Who should read this?
If you sell digital services to private (non-business) consumers
elsewhere in the EU, this affects you.
If you are already aware of the change which came into force on 1 January
2015, that’s great – though you might still find the following guidance useful.
If you are not yet aware of what has changed, we urge you to read on as a
matter of urgency as you may already be in breach of the new rules.
What is meant by “VATMOSS”?
The acronym “MOSS” stands
for ‘Mini-One-Stop-Shop’. It is a mechanism for accounting for EU VAT through a
single VAT registration. For UK businesses, MOSS registrations are administered
by HM Revenue and Customs.
In recent months, however,
the term “VATMOSS” has come to be used as an informal way of referring to the change
to the VAT rules concerning digital services which came into force on 1 January
2015.
What
has changed?
Previously, VAT on
digital services supplied by a UK provider to a non-business customer in
another EU member state was charged and accounted for at the UK standard rate.
This changed on 1 January
2015. From that date, if you supply such services, you must charge and account
for VAT at the rate in force in the customer’s member state.
You can either do this by
registering for VAT in each EU member state where your customers are based, or
by registering with HMRC in the UK under the ‘Mini-One-Stop Shop’ (MOSS)
system.
What services are affected?
At the moment, if you are a UK supplier, this change only applies to ‘digital
services’ supplied to non-business customers located in other EU member states.
However, it is possible that this change could be extended to other
services and goods in time. If you make retail sales to customers in other EU
countries, you need to make sure you keep up to date with any changes in this
area.
What is a ‘digital service’?
Digital services include:
Radio and television broadcasting services;
Telecommunications services; and,
Electronically supplied services.
‘Electronically
supplied services’ include:
·
images or
text, such as photos, screensavers, e-books and other digitised documents provided
in electronic form (eg, pdf files)
·
supplies
of music, films and games, including games of chance and gambling games, and of
programmes on demand
·
online
magazines
·
website
supply or web hosting services
·
distance
maintenance of programmes and equipment
·
supplies
of software and software updates
·
advertising
space on a website
What does ‘electronically supplied’
mean?
This means
that the service is automatically delivered by electronic means with no (or
only minimal) human intervention.
How do I determine where my customer is located?
This can be a difficult area.
HMRC have stated that, in certain circumstances, the customer’s location
can be determined by way of ‘presumption’.
They give the following examples.
Where a digital service is
supplied:
-through a
telephone box, a telephone kiosk, a wi-fi hot spot, internet café, a restaurant
or a hotel lobby, VAT is due in the EU member state where those places are
actually located
-on board
transport travelling between different countries in the EU - VAT is
due in the member state of departure
-through a
consumer’s telephone landline, VAT is due in the member state where the
consumer’s landline is located
-through a
mobile phone, according to the member state country code of the SIM card
-where
services are supplied via a decoder, VAT is due in the member state for the
postal address where the decoder is located
-where
services are supplied by means of a viewing card, VAT is due in the member
state where the viewing card is sent.
In all other circumstances, the
business making the supply must obtain and keep 2 pieces of non-contradictory
information to support and evidence the member state where the customer is
normally located.
Examples of acceptable supporting
evidence include:
-the billing address of the customer
-the Internet Protocol (IP) address
of the device used by the customer
-customer’s bank details
-the country code of SIM card used by
the customer
-the location of the customer’s fixed
land line through which the service is supplied
-other commercially relevant
information (for example, product coding information which electronically links
the sale to a particular jurisdiction).
STOP PRESS
Transitional measure agreed by HMRC
“UK micro-businesses that are below the current UK
VAT registration threshold, and who register for the VAT Mini One Stop Shop
(MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and
accounting decisions on information provided to them by their payment service
provider. This means the business need not require further information to be
supplied by the customer. As payment service providers already collect and hold
a minimum of 2 pieces of information about the member state where the customer
usually resides, the transitional period, until 30 June 2015, will give
micro-businesses additional time to adapt their websites to meet the new data
collection requirements.”
What happens if I sell via a third party platform?
It depends.
Some third
party platforms have confirmed that they take responsibility for VAT accounting
on these sales. However, others have been less clear about who is responsible. You
must check with whatever platform you use if you are uncertain.
In addition,
if you use a payment provider (eg Paypal), it is likely that they will only be
providing a payment facility rather than dealing with VAT on your behalf. The underlying
supply will still take place directly between you and the end consumer - and you
will, therefore, be responsible for any VAT accounting obligations.
How do I account for VAT due on affected services?
If you have
an obligation to account for EU VAT as a result of this change, you have two
options. You can either
·
register
with HMRC to use the UK VAT Mini One Stop Shop
(VAT MOSS), or,
·
register for
VAT in every EU member state where you make digital supplies to
consumers, and file returns and make payments to the tax authorities in each of
those member states.
HMRC
guidance on VAT MOSS registration:
How do I know what rate of VAT to apply?
Information about the rates of VAT in force across the EU can be found at
the European Union’s website:
How do I deal with pricing?
This is proving to be an extremely difficult issue in practice.
The problem is that rates of VAT vary enormously across the EU. However, you
probably won’t know where your customer is located until an order reaches your
online checkout.
In practice, therefore, you might want to consider setting prices at a
level which takes into account the high VAT rates in some EU countries (eg 27%
in Hungary).
Obviously, you will need to balance this with the need to keep your
prices competitive.
My sales to UK customers are under the UK VAT registration limit – do these
rules still affect me?
Yes. Whilst the £81,000 limit continues to apply in respect of UK ‘domestic’
sales, it does not apply to sales to customers in other EU member states. HMRC
are allowing businesses in this situation to register under the VAT MOSS regime
and to charge and account for VAT in
respect of their EU cross-border B2C supplies without having to
charge and account for VAT on their UK domestic supplies.
Can I reclaim VAT on my costs?
You can only reclaim VAT on the
costs of running your UK domestic business if you are registered for UK VAT.
If you are registered under VAT
MOSS you will be able to reclaim any VAT charged on business expenses directly
related to your cross-border digital service supplies.
Note that these rules only
apply to UK VAT. Overseas VAT is covered by a different refund mechanism and
may or may not be recoverable.
Are there any other issues I need to be aware of?
Yes. These new rules have a number of other implications including, for
example:
-Requirement to retain data for 10 years (VATMOSS audits can go back 10
years)
-Obligation to register as a data controller under the Data Protection
Act
-Potential impact on website T&Cs.
Can I get a ruling from HMRC?
It depends. If you have a specific issue where there is genuine
uncertainty and the answer is not clear within HMRC’s guidance, you may be able
to apply for a non-statutory clearance.
Guidance on how to apply for a clearance is contained here:
Where can I get help?
HMRC have published guidance on this issue:
Your accountant or other business adviser should also be able to help
you.
If you have further questions, we would also be delighted to help. You can
get in touch at vat@rwvat.co.uk
Disclaimer: These notes are
provided by way of general guidance and should not be relied upon in making any
decisions regarding your business. RW VAT Services Ltd accepts no responsibility
for any loss suffered as a result of your reliance on any the information
provided.
