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HMRC gives small businesses additional guidance on 1 January VAT changes

Revenue and Customs brief issued on incoming changes for digital service suppliers

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

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HM Revenue and Customs (HMRC) has published additional guidance for UK micro and small businesses who supply digital services to consumers in other EU Member States.

The Revenue and Customs brief tells them:

  • how to comply with new VAT rules on the place of taxation of digital services that come into force on 1 January 2015
  • how to register for HMRC’s VAT Mini-One Stop Shop (MOSS) and still benefit from the UK’s VAT registration threshold for sales to UK consumers.

Affected are UK businesses that sell digital services cross-border to consumers in other EU Member States.

On 1 January 2015, the VAT rules for cross-border Business to Consumer supplies of ‘digital services’ (ie broadcasting, telecoms and e-services) will change. From that date, VAT must be accounted for in the Member State where the consumer normally lives, rather than where the supplier of the service is established.

The change means that sellers of digital services will no longer be able to unfairly undercut businesses in the UK by locating themselves in another EU Member State with a lower VAT rate. More information about these changes is available here.

Published 10 December 2014