Guidance for small businesses on VAT rule change
As many of our readers will be aware there are significant changes to the VAT place of supply rules for businesses supplying digital services. The changes come into effect on 1 January 2015. Currently these supplies are taxed in the Member State in which the business is established. However, from next month, the place of supply will be determined by the location of the customer who receives the service. This change will require businesses that supply these services to register for VAT in every EU Member State where they have customers.
To simplify this process a Mini One Stop Shop (MOSS) will be introduced from 1 January 2015. The MOSS scheme is an electronic system that will allow businesses to register in only one EU member state and submit a single VAT return and payment each quarter for all their cross border supplies of digital services.
HMRC has recently published a new Revenue & Customs Brief concerning these changes. The document is designed to provide additional guidance to UK micro and small digital service suppliers to help them comply with the rule change and to provide guidance on registering to use the MOSS. The guidance also clarifies the difference between using the internet for business and supply digital or e-services. Businesses supplying e-services with a turnover under the current UK VAT registration limit of £81,000 will be required to register and use the MOSS for sales to other EU customers.