HMRC’s mini one stop shop (MOSS) for accounting for VAT on digital services sold in other EU countries seems to have settled down. HMRC has also simplified the rules for some businesses. How might these changes affect you?
Since 1 January 2015, if you sell digital services, that’s broadcasting, telecommunications and e-services, e.g digital downloads or streaming, to a customer based in another EU country who is not in business you must either register for VAT in that country or use HMRC’s mini one stop shop (MOSS) to account for VAT on the sale. Because there’s no minimum value of sales below which you don’t have to charge and account for VAT, this can result in a lot of unwarranted admin.
The small business catch
Businesses that don’t have to register for VAT in the UK, say, because their turnover is below the registration limit, do have to register for MOSS if they make even minimal digital sales. As you can imagine, MOSS is complex and submitting special VAT returns for EU sales is time consuming and tricky.
Future changes to EU digital sales
The Government has been pushing other EU countries to agree to a minimum registration limit specifically for digital sales. It might happen, but not for a while. In the meantime HMRC is on your side for once and is trying to simplify the VAT MOSS system.
First simplification – location
So that you can account for VAT at the rate applying in the country where your customer belongs, MOSS usually requires that you obtain two pieces of information proving their location.
Tip. If your total business turnover is less than the UK annual registration limit (£83,000 from 1 April 2016) you can use your best judgment to decide the EU country your customer is located in. As long as you have one piece of information, such as the billing address or information from a customer’s payment service provider, e.g bank or card company, that’s sufficient.
Second simplification – small sales
HMRC is reviewing the MOSS returns submitted by businesses and if your EU sales of digital supplies are minimal it’s taking the view that it is not really a business so much as a hobby and so not within the scope of VAT. It is taking the bold move of removing those businesses from MOSS. HMRC is stretching the rules here to be helpful to businesses, so you shouldn’t look a gift horse in the mouth.
Tip 1. If you’ve been taken out of MOSS by HMRC already, or will be in the future, on the basis that the value of your supplies aren’t sufficient, our advice is to go with the flow regardless of whether you think HMRC is right or not. The chances of this backfiring on you are extremely small.
Tip 2. If you start to make digital supplies to non-business customers in another EU state, but don’t expect them to be significant, we recommend you contact the VAT Helpline on 0300 200 3700 and ask for advice on whether you need to bother with MOSS. Don’t forget to keep a note of the date, time and person you spoke to.