September 26, 2014
Businesses supplying digital services across the European Union will be able to register for a new HMRC online VAT service from 20 October, to save them from having to register VAT separately in every country where they do business.
From 1 January 2015 the place of supply, and therefore taxation, of EU business-to-consumer supplies of digital services is changing. Currently the place of taxation is where the supplier is established, but from January it will be where the consumer lives.
HMRC has estimated that around 34,000 UK SMEs will be affected by the new EU regulations. The digital services affected include telephone services and supplies of music, films and games as well as downloads of apps, images, text and information.
On 1 January all EU member states will implement the VAT Mini One Stop Shop (VAT MOSS), to avoid additional administrative burdens and costs if a business is required to register for VAT in several member states.
Sally Beggs, deputy director, indirect tax, HMRC, said: “The VAT MOSS will save digital services suppliers from having to register for VAT in every member state where they do business. Businesses with their main operation or headquarters in the UK will register with HMRC to use the service.”
Between 27,000 and 42,000 UK businesses are expected to register for VAT MOSS in the UK. They will be able to register from 20 October 2014.
Some affected SMEs that are currently not registered for VAT in the UK because they are below the threshold will have to register for VAT to allow them to use the VAT MOSS online service. If they do not register for VAT in the UK, they will not be able to use VAT MOSS and will have to register for VAT in each member state in which they have consumer customers.