This sounds like a friendly retail outlet where you might buy a pint of milk on a Sunday evening. In fact it is short-hand for the online portal which UK businesses should use from 2015 to account for VAT they owe in respect of digital services provided to customers in other EU countries.
We mentioned this new rule in our July 2014 newsletter. “Digital services” includes a multitude of products such as:
– music downloads;
– video on demand;
– electronic books;
– online games;
– anti-virus services;
– software purchased by download;
– charges by online auction sites;
– sales of data or images online; and
– automated learning or exams.
From 1 January 2015, if you sell a digital service to someone in another EU country, who is not a business (ie an individual, Government body or perhaps a charity), you must account for VAT in the country where that customer belongs. This means you need to charge VAT on your invoice to your overseas customer at the rate that applies in the customer’s country, and then pay that VAT to the tax authority of that country.
As there are 28 EU countries it would be an administrative nightmare to complete a quarterly VAT return in every country in which you have customers. Hence the need for an online portal (MOSS) to do all the VAT accounting and payment in one go.
The VAT MOSS portal is now open for businesses to register (see https://www.gov.uk/vat-on-digital-services-in-the-eu), but it’s not going to solve all the admin nightmares. For instance:
– you need to know the VAT rates that apply to your products in all the countries you sell to;
– your VAT invoices to customers in other countries must comply with the local regulations – which are NOT the same across the EU;
– VAT-MOSS returns must be made for calendar quarters irrespective of the periods for which you draw up your UK VAT return;
– VAT due under MOSS must be paid electronically by the 20th of the month following the end of the quarter, but payment can’t be made by direct debit;
– the tax authorities for every EU country you sell to can inspect your sales records, which must be retained for 10 years.
On Tuesday 2nd December 2014 , HMRC conceded that while micro companies are still obliged to register for VAT in the UK to use MOSS, they will no longer be forced to charge UK VAT on their domestic sales.
A spokesperson for HMRC said: “Businesses below the current VAT registration threshold that can separate their sales to UK customers from sales to EU customers can voluntarily register the cross border element of their business, and then use that registration number to register for MOSS. This means that their domestic sales will remain VAT free.”
Contact us and let’s talk about what you need to do.