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May 2014

MOSS – HMRC guidance

By Uncategorized|VAT news No Comments

In our blog of 23 May 2014 we summarised the rule changes relating to the supply of business to consumer (B2C) broadcasting, telecoms, digital and e-services, and the requirements for businesses to register for mini VAT on displayone stop shop (MOSS) VAT reporting which will apply from 1 January 2015.

In addition to the challenge of reporting sales under 28 member states’ VAT rules (local sales are still reported on the local VAT return, not the MOSS return), there are some further issues that need to be considered by businesses.  There are detailed rules and guidance published at both UK and EU level and we have summarised below some of the key points:

Key Issues

  • If you are selling through an online platform then it is important to establish whether you or the platform operator are deemed to be making the supply to the customer for VAT purposes.  HMRC suggest that where the platform sets the general ts&cs, collects payment and doesn’t include the sellers details on the invoice/receipt to the customer then it is the platform owner that should be accounting for VAT under MOSS.

It is recommended that agreements with platform providers are reviewed to identify who has the responsibility to account for VAT and how the contract deals with where the liability of the VAT sits (likely to be with the supplier and not the platform therefore care needs to be taken that this VAT has been taken into account when setting margins).

  • You must be able to identify whether the customer is a business or not.  HMRC suggest that the only consistent evidence across all member states will be the collection of the customer’s VAT number (to be able to treat the supply as Business to Business – B2B).

It is recommended that systems are reviewed to ensure that they are capable of clearly identifying B2B and B2C transactions – the starting point being to incorporate the requirement for a customer VAT registration number if applicable during the customer registration process.  The guidance indicates that if no VAT number is obtained for a B2B transaction then VAT will be due under MOSS in the member state where the customer is located, unless countries accept alternative evidence that the customer is “in business” – many do not.

  • Under EU law and the guidance published by HMRC, two pieces of non-contradictory evidence are required to establish which member state the customer is located in and therefore which member states’ VAT should apply to the sale.  HMRC give the following examples:

The billing address of the customer;

The IP address of the device used by the customer;

The location of the bank (we assume this means the location of the bank that issued the debit card/credit card to the customer);

The country code of the SIM on a mobile device;

The location of the customer’s landline through which the service is supplied;

Any other commercial relevant information such as product codes which identify jurisdiction.

Clearly there are systems/customer take on issues to consider relating to the above, and again it highlights the importance of fully understanding the relationship with any portal through which you are selling.  If your business is deemed to be the supplier under MOSS, rather than the platform, then it is important that the information to establish location of customer is available.

  • The difficulty in determining whether something is an e-service or not remains – HMRC have advised that there is a distinction between different forms of e-learning, with some services being covered by MOSS and others not.  The key point is the presence of human interaction whether that be by webinar or other online contact, or by there being human activity in terms of the provision of examination services.  These rules are likely to present additional complexity to businesses in this area as they try to identify which jurisdiction’s VAT law applies and therefore whether any exemptions or reduced rates are available).

We will be attending a joint session being held by HMRC and the EU on the implementation of the changes on 2 June and we will provide a further update.  Should you wish to discuss the above, please contact Sean McGinness on +44(0)1962735250 or your regular TVC contact.

VAT Mini One Stop Shop (MOSS) – the basics

By Uncategorized|VAT news No Comments

VAT under the magnifying glassOn 1 January 2015, the VAT rules across the EU will change in some cases, with the supply of business to consumer (B2C) broadcasting, telecoms, digital and e-services being subject to VAT in the EU member state where the services are ‘consumed’ – where the customer is resident.  These changes are effectively an extension of the VAT on E-services (VOES) rules that have been in force since 2003 for non-EU suppliers.

HMRC has now published its guidance for the UK (http://www.hmrc.gov.uk/news/one-stop-shop.htm).

What does the change mean?

For EU established businesses, currently VAT is accounted for in the member state where the supplier is established.  This means that if a UK supplier of downloadable content, such as a game, sells games to customers in other EU member states, it accounts for UK VAT.  From 1 January 2015, the UK supplier will be required to account for VAT at the rate applying in the member state where the customer is located.

Rather than registering in every member state, there will be a simplified system whereby businesses can register with their local tax authority and complete a special MOSS VAT return. This represents a significant compliance burden for the supplier as the business will still be required to complete its local VAT return.

What do I need to do?

If your business is EU established and sells the above services to consumers (i.e. non VAT registered customers) then it needs to register for MOSS.  The MOSS registration process opens in the UK on 1 October 2014 and businesses are required to account for VAT using the MOSS process from 1 January 2015.

This means from 1 January 2015 you will need to be able to identify the location of your B2C customers as you are required to account for VAT, through your MOSS return, at the local VAT rate in force in the country where the customer is located.  Effectively, this means that, if you are in the UK, rather than having one tax code at the UK standard rate for these supplies, your system will need to have 28 tax codes if you have or anticipate having customers in all Member States, identifying the tax rate in each jurisdiction, with sales to customers posted to the correct VAT account.  This assumes that all sales will be at the standard rate in each country – if there are any supplies that are subject to VAT at the reduced rate then tax codes will also be required for these supplies.

B2C sales to the 27 other member states will be reported on the MOSS return and the VAT paid to HMRC, based on the applicable VAT rate in each country.  B2B and UK (local) B2C sales continue to be reported on the UK(local) VAT return.

MOSS returns cover calendar quarters and may therefore not be co-terminus with your existing UK VAT returns. There is also a tighter filing deadline than UK taxpayers will be used to as the  MOSS returns are due on the 20th of the month following the end of the calendar quarter.

HMRC has indicated that UK MOSS returns must be made in sterling and not in euros or any other currency, which again may represent a systems issue for businesses if they are selling in other currencies.

We will blog further regarding the more technical aspects to the rule change and HMRC/EU guidance on these changes.  Should you wish to discuss how the above affects your business please contact Sean McGinness on +44(0)1962 735 350, or your usual TVC contact.