Business tax – guidance

VAT Mini One Stop Shop: register and use the service

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

Overview

If your business supplies digital services to consumers in the EU, you can register with HM Revenue and Customs (HMRC) the VAT Mini One Stop Shop (VAT MOSS) scheme. There are 2 UK VAT MOSS schemes that operate in an almost identical way:

  • Union VAT MOSS scheme for businesses established in the EU including the UK
  • Non-Union VAT MOSS scheme for businesses based outside the EU (for example, the USA, Canada, China)

By using the VAT MOSS scheme, you won’t have to register for VAT in every EU member state where you make digital service supplies to consumers.

Once you register for a UK VAT MOSS scheme HMRC will set you up automatically for the online VAT MOSS Returns service.

You need to submit a single VAT MOSS Return and payment to HMRC each calendar quarter. HMRC will then forward the relevant parts of your return and payment to the tax authorities in the member state(s) where your consumers are located. This fulfils your VAT obligations.

Registration

Union VAT MOSS scheme

To use this scheme you need to be registered for UK VAT.

If you’re already registered for VAT you can register for the Union VAT MOSS scheme using HMRC Online Services. Log in with the Government Gateway User ID and password you use to register for UK VAT (the same one you use to submit your UK VAT Return).

If you’re not registered for VAT, you must do this before you can apply for the Union VAT MOSS scheme.

Once you have successfully registered for UK VAT you can register for the VAT MOSS Union scheme. Log in to HMRC Online Services using the same User ID and password you used to register for VAT. Your business details, name address and VAT registration number will be automatically populated on your VAT MOSS registration.

Use the VAT MOSS scheme to account for VAT on all your cross-border digital service supplies in member states where you don’t have an establishment.

Non-Union VAT MOSS scheme

Use HMRC Online Services to create a Government Gateway account. You can register for the Non-Union VAT MOSS scheme at the same time.

Registration deadlines

If you don’t want to register for VAT in other EU member states, you must register for VAT MOSS by the 10th day of the month following your first digital services supply. So, for example, if you make supplies on 8 January 2015 and want to use the VAT MOSS scheme to declare sales in the tax period ending 31 March 2015, you must register by 10 February 2015. Your scheme registration will then be backdated to the date of the first cross-border digital services sale on 8 January.

If you have been unable to register by the deadline (the 10th day of the month following your first digital services supply), please email HMRC for advice.

Digital services supplied before 1 January 2015 don’t count as a first supply for the purposes of VAT MOSS. So your first supply, for the purposes of a VAT MOSS registration, is always your first digital services sale on or after 1 January 2015, regardless of whether you made any sales before 1 January 2015.

Businesses currently below the UK VAT registration threshold

Registration

These VAT registration arrangements are only available to you if you meet all of the following criteria:

  • you are a UK-based supplier of digital services
  • you want to use VAT MOSS
  • your UK taxable turnover is below the UK-VAT registration threshold - currently £81,000

If you make taxable supplies of digital services to consumers in other EU member states, and your UK taxable turnover is below the UK VAT registration threshold, you can use VAT MOSS to account for the VAT due in other EU member states, but you don’t need to account for and pay VAT on sales to your UK consumers.

In these circumstances, you must:

  • register for UK VAT
  • when prompted to search for business activity, enter Digital Services and select ‘Supplies of Digital Services’ (below UK VAT threshold) under VAT MOSS arrangements
  • restrict any VAT refund claims you submit to HMRC to amounts directly attributable to your cross-border EU sales activities on which you will be accounting for VAT through VAT MOSS

If these conditions don’t apply, you should choose the business activity that best describes your business.

Following this process will ensure that HMRC can deal with your VAT registration application quickly.

Reclaiming VAT on your expenses and purchases

As you won’t be charging VAT on your UK sales, any VAT you reclaim on your business expenses and purchases (see completing VAT Returns) must be either wholly attributable to your cross-border digital service supplies accounted for through VAT MOSS, or be the proportion relating to those sales. For example, you buy a computer which you use to make all of your sales. If 60% of your sales are UK sales, and 40% of your sales are 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.

You can also reclaim VAT on any business expenses incurred in other EU member states, provided these are directly related to your cross-border sales of digital services. To do this, you’ll need to complete a cross-border VAT refund application.

Completing VAT returns

UK VAT Return

You’ll need to complete a UK VAT Return each quarter even if you aren’t charging VAT on your UK sales.

Unless you want to reclaim VAT on business expenses or purchases in relation to your EU sales, you should enter ‘0’ in every box on the return. If you do want to reclaim VAT in relation to EU sales, you should complete boxes 4, 5 and 7.

VAT MOSS Return

Every quarter you must declare any supplies of digital services to EU consumers on the VAT MOSS Return.

VAT MOSS Return periods are calendar quarters (the first return period runs from 1 January to 31 March). Provided that when you registered for VAT, you selected ‘supplies of digital services (below UK VAT threshold)’ as your business activity under VAT MOSS arrangements, HMRC will ensure that your UK VAT Return period is aligned with the VAT MOSS Return period, so you can complete both the UK VAT Return and the VAT MOSS Return at the same time.

If your UK turnover exceeds the VAT registration threshold

It is important that you monitor your UK taxable turnover. If you exceed 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 any additional tax due.

VAT groups

If a member of a VAT group makes digital supplies the group can register for VAT MOSS (but see next paragraph). The representative member of the group must register using its existing domestic VAT registration number. If you are the VAT group’s representative member you must both:

  • indicate that you are a VAT group representative member when submitting your VAT MOSS registration application
  • use your domestic VAT registration number when registering for VAT MOSS

If any of your VAT group members are established in other member states, notify them that, for the purposes of VAT MOSS, the cross-border VAT group membership links are disregarded. This means they won’t be able to account for the VAT due on any cross-border digital service supplies they make on the group’s VAT MOSS returns. However, any digital service supplies that you, or other VAT group members, make into that member state can be accounted for through VAT MOSS.

If there are members of the group in other member states they must account for any cross-border supplies of digital services to consumers, including to UK consumers, separately from the group. They can do this by registering for VAT MOSS in the member state where they are established.

VAT MOSS deregistration

The VAT MOSS scheme is optional. If you decide to de-register from the scheme, tell HMRC using the online service, at least 15 days before the end of the calendar quarter in which you intend to stop using the scheme. For example, if you want to deregister from 1 July, you must tell HMRC before 15 June.

Once you’ve deregistered from the scheme you won’t be allowed to rejoin that scheme in any member state for 2 calendar quarters (normally starting after the first day of the next calendar quarter).

VAT MOSS returns

The VAT MOSS scheme is used to account for VAT due on all supplies to consumers in member states where you have no establishments.

VAT MOSS returns are calendar quarterly only. The deadlines for submitting your VAT MOSS returns are:

  • 20 April for quarter ended 31 March
  • 20 July for quarter ended 30 June
  • 20 October for quarter ended 30 September
  • 20 January for quarter ended 31 December

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 e-book 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 follows:

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

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

So if you sell 12 e-books 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 residing in territories of certain member states may attract special VAT rates. If so, account for these sales on your VAT MOSS Return by adding them as a separate line of sales against the parent member state using the appropriate VAT rate.

Non-Union VAT MOSS returns

The return should be used to declare the VAT due on all the supplies of digital services you make to consumers inside the EU. This includes supplies 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.

Union VAT MOSS returns

The return should be used to declare the VAT due on supplies of digital services you make to consumers in other member states where you have no establishments.

To submit a Union Return you can either:

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

Any VAT due on sales to UK consumers should be declared on your UK VAT Return. If you are below the UK VAT registration limit and have applied for a special registration in order to use VAT MOSS (see Registration) then the UK VAT Return should show a zero figure for VAT due.

If you have fixed establishments in other member states (for example, VAT registered subsidiary offices, branches or agencies in France and Spain) any VAT due on sales to consumers in those member states should be declared through the VAT returns you make in those member states, regardless of the source of those sales. Similarly, any supplies of digital services to consumers in the UK made by fixed establishments in other member states should be declared on your UK VAT Return and not on your VAT MOSS Return.

If you do have fixed establishments in other member states then the VAT MOSS Return will also contain a section for supplies from these establishments to consumers in member states where you are not established. You must tell HMRC about any fixed establishments you have in other EU countries during or after VAT MOSS registration.

Uploading VAT MOSS Return templates

The VAT MOSS Return templates will only accept the following EU country names as a Member State of Consumption. The member states are:

  • Austria
  • Belgium
  • Bulgaria
  • Cyprus
  • Croatia
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • United Kingdom (United Kingdom as a Member State of Consumption will only be accepted on non-union scheme return templates)

The templates will not accept country codes, for example, GB, UK, NL, or DE, and country description such as, ‘Great Britain’, ‘The UK’ or ‘The Netherlands’.

Member state VAT rates

You can check current and historical VAT rates for each EU member state using the European Commission’s online checking module.

More detailed VAT rate information is available from the Commission’s website.

Changes to VAT rates

In addition to the Commission’s VAT rate checking module, HMRC will publish online notifications of all future changes to the UK and other member state VAT rates.

Mid period VAT rate changes

On occasions Member State of Consumption (MSC) VAT rate changes will take place part way through a tax period. Record a separate line of sales on your VAT MOSS Return for the MSC for both the old and new VAT rate.

Exchange rates

If you charge or invoice consumers in other member states in a currency other than pound sterling, and you record that price in your business accounts in that currency, you must convert the amount into sterling at the end of each calendar quarter. You must use the rate published by the European Central Bank on the last working day of that quarter, see HMRC VAT MOSS conversion rates.

However, if you automatically convert the foreign currency into sterling using an agreed daily or other periodic rate and you record these sterling amounts in your business accounts, you can use these figures to complete your quarterly VAT MOSS Return.

Transitional measures

If the service is supplied after 1 January 2015, but charged for before 1 January, the supplier will have to charge VAT under the old rules. For example, if your consumer pays in full an annual subscription in April 2014, the supply will be taxed under the old rules. However, if your consumer takes out an annual subscription in April 2014, but pays for it on a quarterly basis, the first 3 payments will be accounted for under the old rules, but the final quarterly payment in January 2015 will be taxed under the new rules.

Correcting a VAT MOSS Return

To amend your VAT MOSS Return you must submit a correction to the original return using the online service.

  1. From the ‘At a glance’ screen select ‘View VAT Mini One Stop Shop periods’.
  2. You will see a list of tax periods available for correction, select ‘View or amend return’.
  3. Overwrite to increase or decrease the original return details - do not enter a minus figure.

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 make a change that results in money being owed to you by one or more EU member states, you must ensure that your bank details are up to date in the VAT MOSS system before correcting the return.

European Community (EC) Sales lists

EC Sales lists are not required for sales that are declared on your VAT MOSS Return. If you are below the UK VAT registration limit and have registered for VAT in order to use VAT MOSS (ie, you are registered as a digital services business under the UK threshold) you do not have to complete EC Sales lists.

VAT MOSS payments

See the guide on how to pay your VAT MOSS bill.

VAT MOSS underpayments and overpayments

Underpayments

If you haven’t paid, or don’t pay the full amount, HMRC will email you a reminder on the 10th day following the day on which the payment was due. If full payment is still not received following the issue of the reminder, you may be required to make any further payments relating to that return directly to the member state concerned.

Overpayments

If you realise, or you are notified by a tax authority, that you’ve overpaid the VAT due to the member state(s) in which your consumers are based, that tax authority will refund the overpayment to you in its own currency.

Each member state tax authority operating their own VAT MOSS scheme can keep an administrative handling fee. This is a specified percentage of the VAT due to the other member state. The VAT MOSS tax authority (for example, HMRC for the UK) will deduct this fee before forwarding on the balance to the member state tax authority where the consumer lives. This means that if you’ve made an overpayment, both the tax authority in the member state of your consumer and HMRC will make separate refunds to you.

Tax authorities will only refund the bank account you have entered into the VAT MOSS system, so you must make sure these details are up to date if you are expecting a refund of an overpayment.

Union VAT MOSS scheme recovery of VAT business expenses (input tax)

Arrangements for normal UK VAT registered businesses

The VAT MOSS scheme only allows you to pay VAT on your sales of cross-border digital service supplies. If your business incurs any UK VAT related to those cross-border supplies, you should recover that VAT through your UK domestic VAT Return. If you incur any VAT related to your cross-border supplies in another member state in which you are not VAT registered, you must reclaim that VAT using the electronic cross-border VAT refund scheme.

Arrangements for UK businesses VAT registered under the special VAT MOSS only arrangements are detailed above.

Record keeping

A VAT MOSS registered business is required to keep records containing the following information:

  • member state of consumption to which the service is supplied
  • the date of the supply of the service
  • the taxable amount indicating the currency used
  • any subsequent increase or decrease or reduction of the taxable amount
  • the VAT rate applied
  • the amount of VAT payable and the currency used
  • the date and amounts of payments received
  • any payments on account received before the supply of service
  • where an invoice is issued, the information contained on the invoice
  • the name of the customer (where known)
  • the information used to determine the place where the customer is established or has his permanent address or usually resides

This information must be recorded in such a way that it can be made available by electronic means, without delay, and for each service supplied.

If you use the UK VAT MOSS scheme this does not of itself create a requirement to register as a data controller with the Information Commissioner’s Office (ICO). The normal rules apply which include an exemption for accounts and records, which covers basic customer information. If for any reason the information you hold goes beyond this you may like to check with the ICO if you need to register. Information can be found on the ICO website. If you should need to register the requirement to do so is based on your place of business, and not the location of your customers - so you (as a UK business) will only have to register with the ICO in the UK.

Compliance: audit and penalties

HMRC may conduct checks on your business to make sure you’re following the VAT MOSS rules and keeping appropriate records correctly. If you consistently don’t comply with the rules for the scheme, HMRC may exclude you from using the scheme. If this happens you’ll be sent a message through the online service, and you won’t be able to use the scheme anywhere in the EU for up to 2 years. This means that you’ll have to register for VAT in each of the EU member states where you make digital supplies to consumers. You will also have to make VAT Returns and VAT payments to each of those member states every quarter.

Audit

The tax authority of the member state where you make digital supplies to private consumers has the legal right to audit the records of a business registered for VAT MOSS. The Commission and the vast majority of member states have agreed an audit code of practice to minimise the risk of imposing unreasonable burdens on businesses. This means that normally the tax authority of your home member state will co-ordinate such audit requests and contact the business to discuss the scope and coverage of the audit requirements. It will be possible for an authorised tax official from another member state to attend any audit that is arranged, but the audit team will be led by a UK HMRC official.

Penalties

To resolve disputes and/or pay any penalties or fines, you’ll be expected to deal directly with the tax authorities in the relevant member state to which you make digital supplies and to make the payments using the currency designated by that member state.

VAT on e-Services Scheme

From 1 January 2015, the VAT on e-Services (VoeS) special scheme will be replaced by the Non-Union VAT MOSS scheme. However, the current VoeS website will remain open to registered businesses allowing them to submit any missing VAT Return and their final return for example, quarter 4 of 2014 (tax period ending 31 December 2014). Any records relating to VoeS returns are subject to the rules for VoeS and not subject to the VAT MOSS rules.

All supplies of digital services made to EU customers (private individuals) after 1 January 2015 will no longer be able to be accounted for via the VoeS system. Existing UK VoeS registered businesses can register for the non-Union MOSS scheme.

Further information

For further guidance see VAT: supplying digital services to private consumers.