VAT MOSS – Frequently Asked Questions.

• Labour MEPs are urging UK and EU officials to improve the quality and quantity of information available to small enterprises in the UK.

• Labour MEPs have asked the UK Government to consider putting emergency measures in place to help businesses in this transitional period.

• Labour MEPs have asked the European Commission to review the legislation, including looking at whether or not there a threshold could be introduced to exempt small enterprises.

On 1 January 2015 the VAT rules for cross-border of ‘digital services’ (i.e. broadcasting, telecoms and e-services) changed so that now VAT must be accounted for in the country where the customer lives, rather than where the supplier of the service is established.

If you supply digital services to a customer in another EU Member State, you must account for VAT to the tax authorities in that Member State and at that Member State’s VAT rate.

On 1 January 2015 the VAT rules for cross-border of ‘digital services’ (i.e. broadcasting, telecoms and e-services) changed so that now VAT must be accounted for in the country where the customer lives, rather than where the supplier of the service is established.

If you supply digital services to a customer in another EU Member State, you must account for VAT to the tax authorities in that Member State and at that Member State’s VAT rate.

Yes, if you answer affirmatively to the following:

• If you supply a digital service (broadcasting, telecommunications or e-services) and sell these services for a monetary value to consumers.
• If you sell these services to an EU country, other than the one you are based in.
• If you are a business-to-consumer (B2C) seller, rather than a business-to-business (B2B) seller as B2B sellers use an online platform – such as Amazon and the App Store – and it is the online platform which pays tax.

However, you are not automatically eligible for MOSS just because you sell a product online. If you sell a product online that is not digital (e.g. paper copies of books, not e-books) then VAT MOSS does not apply to you.

An optional one stop shop has been created to avoid extra burdens so you do not have to register for VAT in every Member State you are providing services in.

Instead companies should submit quarterly VAT returns to the One Stop Shop (‘VATMOSS’), detailing supplies of telecommunications, broadcasting and electronically supplied services to non-taxable persons in other Member States, along with the VAT due.

These returns, along with the VAT paid, are then transmitted by the Member State of Identification to the corresponding Member States via a secure communications network.

Those providing digital services will also need to adopt a system whereby they can identify where the customer they are dealing with is resident.

No, you will not need to become familiar with the individual tax regimes of all 28 EU Member States.  The whole purpose of HMRC’s ‘one stop shop’ is to make life as easy as possible for small businesses and individual traders.  If you continue to trade as you do now, then you can submit your sales figures to the One Stop Shop and it will calculate your VAT and present you with a single figure, in pounds sterling.
Yes you will need a VAT number in order to use the one stop shop.  However, where your income is below the threshold of £81,000 you will not need to pay VAT, instead you will indicate nil for these returns. 
If you are below the existing UK threshold of £81,000 of sales in a year, then you are currently exempt from registering for and paying VAT in the UK.  That exemption will remain for UK sales, even if you sell in other Member States.  So while you will have to use the one stop shop and pay VAT on your European sales, your protection from VAT registration and payment in the UK remains
HMRC believes that it should be possible for businesses to obtain and store two pieces of non-contradictory information about where a customer lives at the point of sale – for instance, a billing address or a telephone number with a country code. Businesses will have to store that customer data for 10 years.  However, that requirement could be reviewed and amended if Member States agree that it is disproportionate.  The UK certainly believes that to be the case. The information does not have to be stored on an EU-specific server.
To create a level playing field for all businesses so digital sales are taxed where they are consumed and to protect tax revenues.

Businesses that have moved offshore to low tax or no tax jurisdictions will no longer be able to undercut UK businesses on tax.

Although the principle behind the law is understandable, the implementation of the legislation has been severely lacking.

In particular, the communication around this issue from the UK government has come very late and been of very poor quality. Little thought appears to have been given to small businesses when it comes to the implementation of these measures.

Many small businesses feel that these changes have been forced upon them without being given the correct guidance as to how to apply them, what services are covered by the new rules and to register for the one stop shop.

A helpline has been set up by HMRC, but many people are complaining that they are not able to get through.

The changes apply to digital services. These are broadcasting, telecommunications and e-services that are electronically supplied.

An e-service includes:

• images or text, such as photos, screensavers, e-books and other digitised documents e.g. pdf files
• music, films and games, including games of chance and gambling games, and of programmes on demand
• on-line magazines
• website supply or web hosting services
• distance maintenance of programmes and equipment
• supplies of software and software updates
• advertising space on a website

Not all services provided online will be included; the following will not come under the new rules:

• supplies of goods, where the order and processing is done electronically
• supplies of physical books, newsletters, newspapers or journals
• services of lawyers and financial consultants who advise clients through email
• booking services or tickets to entertainment events, hotel accommodation or car hire
• educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)
• offline physical repair services of computer equipment
• advertising services in newspapers, on posters and on television

Labour MEPs been speaking to both UK and EU officials to enable a smoother transition and improve the quality and quantity of information available in the UK.

Labour MEPs have written to the responsible Minister to ask for emergency measures to aid small and micro businesses attempting to navigate the legislation.

On top of this Labour MEPs have raised this issue with the European Commission, asking whether or not in light of the confusion and disruption to small businesses they would consider a review of the legislation specifically in regards to a threshold where small enterprises would be exempt. When in government, Labour requested such a threshold but this position has not been reflected in the current legislation.

HMRC has created a special email address for specific enquiries: vat2015.contact@hmrc.gsi.gov.uk.

A helpline is also in operation, available at 0300 200 3701.

You may also find some answers in the information that the HMRC recently published. You can also contact them via their Twitter account @HMRCcustomers, where they have recently held a Twitter surgery to help with people’s questions and concerns.

An independent company also created a useful video, which you can watch here.

 

 

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