MINI ONE STOP SHOP (MOSS)
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 (see below) 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.
You also need to be VAT registered in the UK before you can use the MOSS system. Contact us and let’s talk about what you need to do.
VAT ON DIGITAL SERVICES
Do you sell digital services such as: music or software downloads, e-books or online videos? If so, do you know where your customers are, and whether they are businesses or individuals?
From 1st January 2015, when you sell digital services across international borders you will have to collect information about your customers to determine if they are businesses or not, and where they are based. Where your international sale is to a non-business customer, from 2015 you will have to charge that customer VAT of the country where he or she is located (if that’s in the EU).
You will also have to register for VAT in your customer’s country.
This is because the VAT threshold for traders selling into other EU countries is zero.
Many music and software creators are suspicious of the large online stores such as iTunes, and want to sell their tunes or games directly to their customers. If you sell through a large online store, that store sorts out the VAT so you don’t have to worry about it. However, if you sell your digital product directly to non-business customers who are located in other EU countries from 1st January 2015, you must deal with the VAT consequences.
The easiest way to do this will be through the HMRC website under a system called VAT-MOSS. This system goes live from October 2014, and it will allow you to account for VAT in all the EU countries you sell services to.
However, in order to use VAT-MOSS you must first be registered for VAT in the UK. If you are not already VAT registered, perhaps because your turnover does not exceed the UK VAT threshold of £81,000, you need to pick one of these options:
1. register for VAT in the UK;
2. stop selling digital services to non-business customers outside the UK; or 3. sell only through online stores or other businesses