Digital services and MOSS
If you supply ‘e-services’ to clients, you may have to comply with new VAT rules from 1 January 2015. The changes also cover ‘Broadcasting’ and ‘Telecommunications’ providers – if you think that includes you, please speak to us. If you think you might supply e-services, then read on. Also, if you buy these services, this might be of interest too.
What are e-services?
HMRC define these as including video on demand, downloaded applications (what normal people would call ‘apps’), music downloads, gaming, e-books, anti-virus software and on-line auctions. Typically these would be downloaded by your customer from a website. (Selling something through a website does not automatically make the thing an e-service – it depends what services are being supplied.) At present if you supply these types of services, the supply to consumers (end users – not businesses) is taxed for VAT purposes in the country where the supplier belongs.
Broadly, from 1 January 2015 this type of supply will be taxed where the consumer belongs. For example, if a company sells apps to individuals across Europe, currently all those supplies would be treated as UK supplies and UK VAT would be due (assuming the company either chooses to register for VAT, or is required to register for VAT due to its turnover). From January, VAT on the same supplies would be due in each of the countries where the individuals reside.
This could mean that a business currently registered for VAT just in the UK would now need to be registered across Europe, and file lots of different VAT returns. In many countries, there is no threshold for VAT registration, so unlike the UK, one VATable supply in a country could bring a liability to register for VAT in that country.
How should a business deal with this?
Fortunately, HMRC have set up a system that allows an affected supplier to register for all the different territories (in the EU) through the UK tax authorities. They have called this the Mini One Stop Shop, or VAT MOSS. The rate of VAT you use varies from country to country, but at least with MOSS, it can all be collected in one place. (If you like the sound of registering for VAT in lots of different countries, then of course you could chose not to use MOSS – it’s up to you.)
To register for MOSS, it is necessary to have a UK VAT number. For a small business, currently below the VAT turnover threshold of £81,000 per annum, registering for VAT to use MOSS might therefore have the unfortunate side-effect of adding VAT to your prices – a big problem as your customers would not normally have any chance of recovering the VAT element of your increased charges. However, HMRC have now enabled such businesses to register for VAT to the extent necessary to use MOSS, without becoming liable for UK VAT until the usual rules kick in.
Further guidance is available here, covering the changes, and the special MOSS registration for businesses that might otherwise not want to register for UK VAT. HMRC are continually refreshing their guidance on this new issue, so make sure you’ve got the latest advice. As ever, please speak to your usual JSA contact to find out more, or email us on [email protected] .