Business tax – guidance

VAT Mini One Stop Shop: register and use the service

How to register and use the VAT Mini One Stop Shop (VAT MOSS) to report and pay VAT due on sales of digital services to consumers in the EU.

Overview

From 1 January 2015 the VAT rules for place of supply changed in the EU for sales of digital services from businesses to consumers. The change doesn’t affect business to business sales.

For cross border supplies of digital services there is no registration threshold and VAT is charged at the rate due in the consumer’s country.

If your sales are not being made as a business - for example as a hobby activity with occasional sales rather than a commercial activity - the changes don’t apply to you and you don’t need to register for VAT or use VAT MOSS.

Guidance on what you need to consider when deciding whether your activity is ‘business’ can be found in the VAT Business/Non-Business Manual.

To pay the VAT due on sales you can either:

  • register for VAT in each EU country where you supply digital services to consumers
  • use the VAT MOSS scheme in one EU country

How the VAT MOSS scheme works

There are 2 types of scheme:

  • Union VAT MOSS - for businesses based in the EU, including the UK
  • Non-Union VAT MOSS - for businesses based outside of the EU

Union VAT MOSS

To use the Union VAT MOSS scheme in the UK, your business must:

  • be based in the UK, or be a non-EU business with a fixed establishment in the UK
  • be registered for UK VAT
  • supply digital services to consumers in the EU

If your business turnover is below the UK VAT threshold you still need to register for UK VAT to use the Union VAT MOSS scheme.

Non-Union VAT MOSS

To use the Non-Union VAT MOSS scheme in the UK, your business must:

  • be based outside of the EU
  • have no fixed or business establishments in the EU
  • supply digital services to consumers in the EU

How UK VAT MOSS works

Once you register your business for the scheme, you must account for the VAT due on any qualifying sales by sending HM Revenue and Customs (HMRC) a VAT MOSS Return and payment each calendar quarter.

This means you only need to send a single VAT MOSS Return, each calendar quarter. You don’t have to declare the VAT due separately in each EU member state.

HMRC will send the relevant parts of your return and payment to the tax authority of the country where your customers are based.

How to register

How you register depends on which type of scheme you need to use.

You must register for the scheme yourself, if you have an agent they won’t be able to register for you. Once you’ve registered you can authorise an agent to submit your VAT MOSS Returns. Your agent will need to sign up for the VAT MOSS for Agents online service.

Register for Union VAT MOSS

You must be registered for UK VAT before you can apply for the Union VAT MOSS scheme.

If you’re already registered for UK VAT you can log in to HMRC Online Services to register for Union VAT MOSS. You need to sign in with your existing Government Gateway user ID and password, this will be the same one you use to submit your VAT Return. Make sure your user ID and password was set up for an organisation.

If you don’t already have a Government Gateway account user ID and password, you can set this up when you register for UK VAT through HMRC Online Services.

If you have any fixed establishments in other EU member states you must tell HMRC about these when you register for Union VAT MOSS. If you’re already registered you’ll need to tell HMRC about any new fixed establishments through your VAT MOSS account, in HMRC Online Services.

If your business turnover is below the UK VAT threshold

If you’re in business but your turnover is below the UK VAT threshold you’ll need to:

  • register for VAT before you can register for Union VAT MOSS
  • enter ‘Digital Services’ and select ‘Supplies of Digital Services (below UK VAT threshold) under VAT MOSS arrangements’ - when asked to search for a business activity as part of VAT registration

If you only register for UK VAT so you can use the VAT MOSS scheme, you’ll only need to submit nil VAT Returns.

Register for Non-Union VAT MOSS

To register for the Non-Union VAT MOSS scheme you need to create a Government Gateway account. Once you have your user ID and password you can log in to HMRC Online Services to register for Non-Union VAT MOSS.

VAT groups

If your business is part of a VAT group the group can register for UK VAT MOSS if any member of the group qualifies for the scheme. The representative member must register using the group’s UK VAT number.

If you’re a VAT group’s representative member, when you register for VAT MOSS you must:

  • state you’re the representative member
  • quote your group’s UK VAT registration number

Put ‘no’ when asked if there are any fixed establishments in other member states. Any ties with establishments outside the UK are considered to be broken for VAT MOSS purposes. As a result, a group registered for VAT MOSS in the UK can only use it to declare sales of digital services to consumers outside the UK that are made by the group’s UK establishments and it should be used for all such sales, whether or not the group has fixed establishments outside the UK. A VAT group should not enter details of any fixed establishments outside the UK when registering for VAT MOSS.

If any of your group members have fixed establishments in,or are based in other member states, these should register for VAT MOSS in the member state where they are established.

If you need further information on VAT groups within VAT MOSS, please email HMRC for advice.

Registration deadlines

You must register for VAT MOSS by the 10th day of the month after your first digital service sale. For example, if your first sale of digital services is on 8 January 2015, you must register by 10 February 2015. Your VAT MOSS registration will be backdated to 8 January, the date of your first sale.

If you’ve not been able to register by the deadline, email HMRC for advice.

If you want to leave the scheme

VAT MOSS is optional, so you can deregister your business if you no longer want to use the scheme.

To deregister you need to log in to HMRC Online Services and go to the VAT MOSS ‘change registration details’ section from the ‘services you can use’ page.

As the scheme runs on a quarterly basis, you’ll need to tell HMRC you want to leave the scheme at least 15 days before the end of the quarter you want to leave. For example, if you want to deregister from 1 July, you must tell HMRC before 15 June.

Once you’ve deregistered you won’t be able to rejoin scheme, in any member state, for 2 calendar quarters. You’ll need to wait until the first day of the calendar quarter after this period before you can join the scheme again.

VAT MOSS Returns

When you register HMRC will automatically set you up for the online VAT MOSS Return service.

You need to log in to HMRC Online Services to send HMRC your VAT MOSS quarterly return. The deadlines for the returns are:

  • 20 April - for first quarter ending 31 March
  • 20 July - for second quarter ending 30 June
  • 20 October - for third quarter ending 30 September
  • 20 January - for fourth quarter ending 31 December

Union VAT MOSS Return

Use this return to declare VAT due on sales of digital services to consumers in EU member states, where you have no place of business. Don’t include UK sales, these must be declared on your UK VAT Return.

To submit a Union Return you can either:

The VAT MOSS: Union Return guide tells you how to do this.

If you have fixed establishments in other EU member states, any digital sales you make to consumers there must be declared in those countries.

You can only use the Union VAT MOSS scheme to declare sales to consumers in member states where you have no fixed or business establishments.

If your business turnover is below the UK VAT threshold

As well as a VAT MOSS Return, you’ll need to complete a nil UK VAT Return.

If you need to reclaim VAT paid on business expenses or purchases, use your UK VAT Return to do this instead of submitting a nil return. You can’t reclaim these on your VAT MOSS Return.

If your business turnover goes over the UK VAT threshold

It’s important that you monitor your UK taxable turnover. If you go over the VAT registration threshold, you’ll need to start accounting for VAT on UK sales.

If you don’t start to account for UK VAT at the right time, HMRC may assess the tax due.

Non-Union VAT MOSS Return

Use this return to declare VAT due on sales of digital services to consumers in the EU. This includes sales to UK consumers.

To submit the Non-Union Return you can either:

The VAT MOSS: Non-Union Return guide tells you how to do this.

How to calculate the VAT element of a VAT inclusive price

If you charge customers a flat rate VAT inclusive (or gross) price then you need to calculate what proportion of that price is VAT in order to be able to complete your VAT MOSS Return.

For example, you may sell an ebook and charge all your customers £10 including VAT, regardless of where the customer is based. The amount of VAT in that £10 will vary, depending on the VAT rate of the country where the customer is based. To calculate the VAT you should use what is known as the VAT fraction for the country. If you divide the total sales by the VAT fraction the result is the amount of VAT contained within your total sales.

The VAT fraction is calculated as:

(100 + VAT rate) ÷ VAT rate = VAT fraction

So for Sweden (VAT rate 25%) the VAT fraction would be (100 + 25) ÷ 25 = 5.

If you sell 12 ebooks costing £10 to customers in Sweden (VAT rate 25%), the total sales value is £120 and the VAT would be £120 ÷ 5 = £24.

As the VAT is £24, this means the VAT exclusive (or net) value of sales is £120 - £24 = £96.

How to account for sales to a member state territory

Taxable sales of digital services to consumers based in territories of certain member states may attract special VAT rates. If so, add these sales to your VAT MOSS Return on a separate line, against the relevant parent member state (and add the appropriate VAT rate).

Member state VAT rates

If you need to look up VAT rates to complete your return, the European Commission publishes current and historical VAT rates for each EU member state.

You can also find changes to the UK and other member state VAT rates in HMRC’s VAT Information Sheets.

If the VAT rate of a member state changes part way through a tax period, record the sales for the old and new rates on separate lines of your VAT MOSS Return.

Exchange rates

If you charge non-UK consumers in a currency other than pound sterling and record that currency in your business accounts, you must convert the amount into sterling when you enter the sale on your quarterly return.

To do this you must use the European Central Bank conversion rates which are published on the on the last working day of each calendar quarter.

You can find the conversion rates for each quarter in HMRC’s VAT Information Sheets.

If you automatically convert the foreign currency into sterling on your business accounts (using an agreed daily or other periodic rate) you can use the figures from your accounts to complete your quarterly VAT MOSS Return.

EC Sales Lists

You must not complete EC Sales Lists for sales you declare on your VAT MOSS Return.

If your business turnover is below the UK VAT threshold and you’ve only registered for UK VAT so you can use VAT MOSS, you won’t need to complete EC Sales Lists at all.

How to correct a VAT MOSS Return

If you need to make a change to a return you’ve already submitted, log in to HMRC Online Services, go to your VAT MOSS account, then:

  1. From the ‘at a glance’ screen, select ‘view VAT Mini One Stop Shop periods’.
  2. Find the return you need to correct from the list of tax periods shown and select ‘view or amend return’.
  3. Select the value on the return you want to change and enter the correct amount – don’t enter minus values.

To change an incorrect VAT rate (or VAT rate format) for a member state:

  1. Change the ‘total value of taxable supplies excluding VAT (£)’ to ‘0’ (zero).
  2. Add a new line, using the relevant ‘Add taxable supplies’ link, with the correct VAT rate or VAT rate format.
  3. Repeat for all incorrect entries.

You can make changes to your VAT MOSS Return up to 3 years and 20 days after the end of the relevant period.

If you need to make a change that will mean you’re owed a refund, make sure your bank details are up to date in your VAT MOSS account before you correct the return.

How to pay your VAT MOSS bill

You must pay HMRC the VAT due once you have submitted each quarterly VAT MOSS Return. The deadlines for the quarterly payments are the same as the return deadlines.

Your payment must reach HMRC on the last working day before the weekend or a bank holiday. The time you need to allow depends on how you pay.

The guide on how to pay your MOSS VAT bill explains where to send payments for Union and Non-Union schemes. If you use the Union scheme, make sure you pay your bill into the correct account and quote the payment reference. You can find your payment reference:

  • on the acknowledgement screen when you submit your VAT MOSS Return
  • by going to the ‘customer communications’ section of your VAT MOSS account in HMRC Online Services

You can’t pay Union VAT MOSS along with your UK VAT bill. You must pay your VAT MOSS bill into HMRC’s VAT MOSS account.

If you overpay

If you overpay VAT through the VAT MOSS scheme, the tax authority of the country where you made the sales to consumers will repay the amount you overpaid to them. Countries will make any repayment to you in their own currency.

If you use the Union scheme you’ll also get a proportion of your refund from the tax authority of the country whose VAT MOSS scheme you used. This is because the VAT MOSS tax authority keeps an administrative fee before sending the balance on to the country where the VAT is due. So if you’ve overpaid through UK VAT MOSS, the tax authority in the country of your consumer and HMRC will make separate refunds to you.

Your refund can only be sent to the bank account you’ve entered in the VAT MOSS system, so you must make sure this is up to date.

If you underpay

If you haven’t paid your VAT MOSS bill, or don’t pay the full amount, HMRC will send you an email reminder 10 days after the payment is due. If you don’t pay after the reminder has been sent, you may have to make any further payments direct to the tax authority of the country concerned.

Records you need to keep

If you use the VAT MOSS scheme, for each sale, you must keep records of:

  • the member state where you made the sales - known as the member state of consumption
  • the date you supplied a service
  • the taxable amount, including the currency used
  • any increase or decrease of the taxable amount
  • the VAT rate you applied
  • the amount of VAT due and the currency used
  • payments your business received - the dates and amounts
  • any payments on account your business received for services before you supplied them
  • the information shown on any invoices you issued
  • your customers names - where known
  • the information you used to work out where a customer is based

You must keep this information for 10 years and be able to send it to HMRC electronically if asked.

Information Commissioner’s Office (ICO)

If you use the UK VAT MOSS scheme it doesn’t mean you’ll need to register as a data controller with the ICO. The ICO rules have an exemption for accounts and records which cover the basic customer information you need for VAT MOSS.

If you hold more information than this you may want to check if you do need to register. You can find more information on the ICO website. If you do need to register this will be based on your place of business and not the location of your customers – as a UK business you will only need to register with the ICO in the UK.

How to reclaim VAT on business expenses and purchases

You can reclaim VAT you pay on business expenses and purchases relating to VAT MOSS qualifying sales, but you can’t use your VAT MOSS Return to do this. How you reclaim the VAT depends on your circumstances.

If you charge UK VAT

Use your UK VAT Return to reclaim any UK VAT you’ve paid on business expenses and purchases, including those for VAT MOSS qualifying sales.

If you don’t charge UK VAT

If you’ve registered for UK VAT to use the VAT MOSS scheme only, and are under the UK VAT threshold, you can:

  • reclaim VAT you’ve paid on business expenses and purchases relating to your VAT MOSS qualifying sales
  • use your UK VAT Return to make the claim – instead of submitting a nil return

If you have expenses and purchases that fully relate to qualifying sales you can reclaim the full amount of VAT you paid on these.

If you have expenses and purchases that partly relate to VAT MOSS qualifying sales, you can only reclaim the proportion of VAT that relates to those sales.

You’ll need to work out the proportion of your VAT MOSS qualifying sales. For example, if you buy a computer and use it to make sales which are made up of:

  • 60% UK sales
  • 40% sales of digital services to consumers in other EU member states

You can recover 40% of the VAT charged on the purchase of the computer if the computer is only used for business purposes.

If you’ve paid VAT on business expenses in other EU member states

If you pay VAT on business expenses in other EU member states, you can reclaim the VAT as long as the expenses directly relate to your VAT MOSS qualifying sales. To do this, you’ll need to complete a cross-border VAT refund application.

Compliance: audit and penalties

HMRC may carry out checks on your business to make sure you’re following VAT MOSS rules and keeping records correctly. If you regularly don’t follow the rules you may be removed from the scheme. If HMRC decides to do this, you’ll be sent a message through the online service and won’t be able to use the scheme anywhere in the EU for up to 2 years.

If you receive a VAT MOSS penalty or fine from the EU member state where your VAT is due, you must pay or resolve any disputes with that tax authority. You’ll need to pay any penalty or fine in the currency of that country.

If you’re registered for VAT MOSS, the tax authority of the member state where you make digital sales to consumers has the legal right to audit your VAT MOSS Return (PDF, 45KB). Normally the tax authority of your home member state will co-ordinate any audit request and contact you about this.

VAT on e-Services scheme

From 1 January 2015, the VAT on e-Services (VoeS) scheme was replaced by the Non-Union VAT MOSS scheme. The VoeS website will remain open to businesses already registered for VoeS so they can submit any missing returns.

Records relating to VoeS returns are subject to VoeS rules and not VAT MOSS rules. You can only use the VoeS scheme to declare sales made before 1 January 2015. Existing UK VoeS registered businesses can choose to register for the non-Union MOSS scheme for sales after this date.