© Crown copyright 2016
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-4-2016-vat-moss-simplifications-for-businesses-trading-below-the-vat-registration-threshold/revenue-and-customs-brief-4-2016-vat-moss-simplifications-for-businesses-trading-below-the-vat-registration-threshold
Purpose of this brief
This brief outlines the simplifications available to businesses trading below the UK’s VAT registration threshold (currently £82,000) that make supplies of digital services (telecommunications, broadcasting or electronically supplied services) to consumers in other EU member states. Some simplifications are already in place and this brief announces 2 new areas of help for the smallest businesses.
Who should read this brief
You should read this brief if you provide digital services to consumers or other non-business customers in other EU member states and your total turnover is below the UK VAT registration threshold.
On 1 January 2015 the VAT place of supply for digital services supplied to consumers and other non-business customers inside the EU changed from where the supplier belongs to where the customer belongs. Businesses making these supplies became liable to register for VAT in each country where they supplied digital services.
To make it easier to comply with this change the VAT MOSS system was introduced. Businesses using VAT MOSS can declare and pay the VAT due on their sales of digital services to customers across the EU using a single return and payment. This can be done in their home member state, instead of registering for VAT in every member state where the VAT is due.
More information on the place of supply rules can be found in the guide VAT: supplying digital services to private consumers.
Simplifications if you trade below the UK VAT registration threshold
The UK has introduced additional measures to reduce the impact of the changes for smaller businesses.
Evidence of where your customer belongs
Businesses need to determine where their customer is located.
From the start, HM Revenue and Customs (HMRC) has allowed UK businesses that are below the UK VAT registration threshold and registered for VAT MOSS to base their customer location decisions based solely on the information provided to them by their payment service provider.
HMRC introduced this simplification in response to feedback from small businesses that said that they found it difficult to obtain 2 pieces of evidence.
HMRC recognises that some small businesses have still found this difficult, so the requirements have been simplified further to allow small businesses to make a judgement on customer location based on a single piece of information.
Consider if you’re in business – and therefore within the scope of the changes
There is no registration threshold on cross border supplies of services and businesses of all sizes fall within the scope of the changes. However, this only applies where supplies are made in the course or furtherance of a business. If activity is carried out as a hobby (ie only on a minimal and occasional basis), HMRC does not normally see this as a business activity for VAT purposes.
HMRC’s analysis of the VAT MOSS returns submitted by UK businesses so far indicate that some of those registered for VAT MOSS may not be in business for VAT purposes.
HMRC will contact those already registered for VAT MOSS whose returns suggest they may not be in business.
Guidance on what you need to consider when deciding whether your activity is by way of business can be found in HMRC’s VAT Business/Non-Business Manual.
VAT MOSS registration
One of the existing simplifications is that businesses that fall under the current VAT registration threshold of £82,000 may register to use VAT MOSS for their cross border sales. These businesses can still benefit from the UK’s domestic VAT registration threshold and do not have to account for VAT on supplies to UK consumers.
What to do if you have any questions
If you have any questions about this brief or you would like to discuss your VAT MOSS registration in more detail, please contact the HMRC VAT MOSS mailbox at email@example.com or write to the VAT Written Enquiries Team.