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 one 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:
- 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.