With effect from 1 January 2015 the EU has brought in a new EU VAT scheme which directly affects UK businesses making digital supplies to customers in the EU.
Essentially the change is to “the place of supply”. Up until the end of 2014 the place of supply was where the supplier is based – ie here in the UK. If you are VAT registered you would charge UK VAT on your supply, and if you are not VAT registered you wouldn’t charge VAT. However, now the “place of supply” is where your customer is based.
On 1 January 2015 you sell a download of your latest album to a customer in Germany. You now need to charge German VAT on that product!
You have two choices:-
1. Register for VAT in Germany – which, aside from the language barrier, will be an administrative nightmare; or
2. Use the EU VAT MOSS – “mini one stop shop”. This means you declare the VAT charged (at UK rate of 20%) and pay it over for all of your EU sales. This way you avoid registering in each individual country.
If you are not currently VAT registered you will need to register for VAT to be able to use the VAT MOSS scheme. You can register via HMRC website. However, this does not mean that you need to charge VAT on your UK sales going forward (unless over the UK sales threshold). You do need to go through the VAT registration process, include your VAT registration on any invoices to the EU, submit quarterly returns to HMRC, and pay over the VAT in relation to EU digital sales. Payment can be made via HMRC website.
My UK sales are lower than the current VAT threshold of £81,000 therefore I won’t have to register will I?
You will have to still register for VAT via MOSS. The UK VAT threshold is based on UK sales only. The EU has not sent a de minimis amount. Therefore, if your sales are £1,000 you need to still register for VAT via MOSS. However, you do not declare your UK sales on the VAT return, just those digital sales to EU countries.
When I complete the form on HMRC website it is asking me what my UK sales are – they are below the threshold and I am not sure what to include. Help?
You need to include £0.00 in the UK sales box.
How do I know where my customer is located?
You can use your customer’s postal address or bank sort code. If you search a bank sort code on the internet it will bring up the branch details. You also need to retain this information for your records for the next ten years.
If I register for MOSS can I now claim my VAT on expenses back?
You cannot claim VAT back on UK purchases, however you can claim VAT back on any EU purchases which are wholly attributable or can be part apportioned to the EU digital sales.
If I register for MOSS and then decide that I am no longer going to supply to EU customers – how do I stop reporting to HMRC?
You need to de-register from MOSS. You need to tell HMRC at least 15 days before the end of the VAT quarter in which you intend to stop using the scheme.
This is the link to HMRC’s website where you can register for MOSS and find out more about it:
We hope that this helps gives some guidance to what can be quite a complicated area. Please drop us a line or give us a call if you want to discuss this further.