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A number of changes to VAT rules on the place of supply of services were agreed by the EU in 2008 to ensure taxation takes place where services are consumed. The change to the place of supply of telecommunication, broadcasting and electronic services (‘digital services’) to non-business consumers is the last of those changes, and will take effect on 1 January 2015.
This change will mean that suppliers of digital services are liable to account for VAT in the member States where their customers are located and may become liable to register for VAT in those States. In order to simplify this MOSS is being introduced which will allow businesses to register in just one EU member State and submit a single VAT return and payment each quarter for all their cross border supplies of digital services.
There are two MOSS schemes one for businesses based in the EU and one for businesses based outside the EU. The latter will replace the existing VAT on Electronic Services Scheme (VOES).
The UK’s implementation of these changes was announced at Budget 2013, and the main legislation was consulted on following the 2013 Autumn Statement. The primary legislation now forms clauses 103 to 106 of the Finance Act 2014.