The VAT Mini One Stop Shop ("MOSS") - Are you ready?
8th December 2014
The VAT Mini One Stop Shop (“MOSS”) – Are you ready?
The EU VAT place of supply of services rules relating to business to customer supplies for digital services are due to change from 1 January 2015.
Digital services includes broadcasting, telecommunications and e-services and so has the potential to affect a wide range of businesses.
In particular interest to many of our clients is the supply of “e-services”, which HMRC has defined as including “video on demand, downloaded applications (or “apps”), music downloads, gaming, e-books, anti-virus software and on-line auctions.”
Unfortunately, HMRC’s definition does not quite go far enough and if you do a bit of research you find that many other supplies are potentially caught within the definition of e-services. These can include supplies of:
· Websites, web-hosting, distance maintenance of programmes and equipment.
· Software and updating thereof
· Images, text and information and making available of databases
· Music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events
· Distance teaching
It is extremely important that businesses check immediately whether they are caught within the wide definition of digital services, so they know if they need to do anything before the rules change.
The new rules will apply if your business makes digital supplies to other EU member countries. However, where the supplies are made through an online marketplace, store or platform, then you will need to determine whether you are actually supplying the platform operator (e.g. Amazon) or you are supplying the final customer. If you are supplying the platform operator, then it would be that business that would be affected by the rule changes and not yours.
The changes to the rules mean that if you supply digital services to a customer in another EU member country (e.g. Germany), you would need to charge that member country’s VAT (e.g. German VAT at the German VAT rate).
This is potentially a complete nightmare for many small businesses and could mean that your business may have to register for VAT in up to 27 EU member countries (if you sold to customers in all member countries) and then submit and pay VAT returns to each member country’s own tax authority. In order to avoid having to register for VAT in each member country and having to deal with many VAT returns, HMRC have introduced the “Mini One-Stop Shop” or MOSS return.
The MOSS return allows you to declare all the VAT charged and collected in each EU member country and pay over one figure to HMRC. The MOSS returns are calendar quarter based, so the first “MOSS” return would be 1 January 2015 to 31 March 2015 and would be due for submission and payment by 20th April 2015 (only 20 days after the quarter end).
If you think the rule changes may affect your business, I would encourage you to speak with your accountant as soon as possible.
Written by Luke Thomas, Director