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UK Issues Extra Guidance On 2015 VAT MOSS Changes

by Jason Gorringe, Tax-News.com, London

15 December 2014


The UK tax authority, HM Revenue and Customs (HMRC), has issued additional guidance to support small- and medium-sized businesses in complying with the change to European Union value-added tax (VAT) place of supply rules for broadcasting, telecommunications, and electronic (BTE) services from January 1, 2015.

The release of Revenue and Customs Brief 46 of 2014 follows a call from Enterprise Nation, a group of small businesses and freelancers, for concessions and guidance. They warned the UK Treasury that there is a general lack of knowledge among small traders about the changes, and raised concerns about the challenges and costs of compliance.

From January 1, 2015, the place of supply for cross-border business-to-consumer BTE services will newly be the location of the customer, rather than the place in which the supplier is located. To simplify compliance arrangements, every EU member state is offering Mini One-Stop Shop schemes. This will enable digital suppliers to register in a single member state, from which they will be able to account for VAT on supplies to all EU consumers, without having to register in each member state in which they make supplies.

The Guide specifically covers how UK-based small businesses (those whose UK turnover falls below the VAT registration threshold) can comply with the new VAT rules for digital suppliers. HMRC has confirmed that, although UK-based suppliers of digital services are required to have a UK VAT registration number and register for VAT, registration to use the UK MOSS does not prevent a small business from benefiting from the UK VAT registration threshold. As such, the impact of the changes – for companies below the UK VAT registration threshold – should be limited exclusively to the requirements under the new regime for digital services, if applicable.

The Guide also reiterates that the use of the MOSS is voluntary. However, HMRC has confirmed there is no exempt threshold for the changes; every business making supplies to EU consumers must account for VAT from next year.

To support businesses to understand the scope of the changes, HMRC has released a negative list of activities not covered by the changes, including:

  • Supplies of goods, where the ordering and processing are electronic;
  • Supplies of physical books, newsletters, newspapers, or journals;
  • Services by lawyers and financial consultants who advise clients through e-mail;
  • Booking services for 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;
  • Offline physical repair services of computer equipment; and
  • Advertising services in newspapers, on posters, or on television.

HMRC has clarified the change is only intended to impact e-services, such as:

  • Images or text, such as photos, screensavers, e-books, and other digitized documents, such as pdf files;
  • Music, films, and games, including games of chance and gambling games, and of programs on demand;
  • Online magazines;
  • Website supply or web hosting services;
  • Distance maintenance of programs and equipment;
  • Supplies of software and software updates; and
  • Advertising space on a website.

HMRC has also addressed a number of specific queries concerning supplies of certain digital services, confirming, for instance, that while a PDF document manually emailed by a seller is an e-service, it is not covered by the upcoming regime.

The guide also covers reclaiming VAT on expenses and purchases; completing VAT returns, including the VAT MOSS return; and record-keeping requirements, including the mandatory requirement to register with the Information Commissioner's Office.

The guidance clarifies that businesses who have yet to make a digital supply may register after the introduction of the regime, by the 10th day of the month following the supply of the business's first digital service.

HMRC has said that it intends to consolidate its newly released additional guidance with the briefs that it has released to date.

CCH Global VAT Research Library
TAGS: court | compliance | VAT tax authority guidance | VAT special schemes | VAT registration / deregistration | tax | small business | business | European Commission | tax avoidance | VAT legislation | VAT cross-border transactions | law | United Kingdom | tax authority | internet | professionals | legislation | retail | services | VAT goods & services classification | VAT refunds | VAT compliance matters | Europe | Tax

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