Are You Ready for VAT MOSS?

15 December 2014, 12:48

We’re already familiar with lots of different ways the EU has changed the way we do things in the UK. This applies just as much to businesses as it does to individuals.

An excellent example of this has become apparent in the last month or so, as the new rules about VAT on digital sales within Europe have become clear. According to official information, if you sell digital products or services that don’t need human intervention to sell them, i.e. eBooks for example, these would be included in the new rules. As an example, HMRC mentions the idea of an e-course that does not have any human involvement. At present the provider of that service (assuming they are in the UK) would pay VAT in the UK as well. ON 1st January 2015 this will change. Instead of the VAT being payable in the UK it will be payable in whichever EU country the customer is in.

The rules do not apply in those situations where a human being has to provide the service. For example if the e-course has human involvement in terms of someone actually providing the course live on air, so to speak, or live over the internet, this won’t come under the new rules.

We would of course recommend you take proper professional advice regarding this situation from your accountant or another tax expert so you can be certain of where you stand. But clearly you should find out before 1st January 2015 where you and your business stand in this respect.

The VAT MOSS scheme has been set up by the UK government to provide an alternative to having to register separately in every other EU country. You will have to register for a VAT number and then register for the VAT MOSS system as well. Even so, there looks to be a lot of paperwork involved with regard to complying with the system if you sell digital products or services that fall within the rules.

Indeed, some stories online have involved the worries and fears of many small traders who look to have been caught in the net over the new rules. The rules came in as a way of making sure major firms such as Amazon paid more tax than they do at the moment. However they seem to have been made on a catch-all basis, so an individual making perhaps £5,000 in their spare time will be caught just as major companies will be.

The UK threshold for paying VAT is currently £81,000. However there will be no threshold in place for those who sell digital products and services to EU countries. While recent rule changes have led HMRC to keep the UK threshold in place, it won’t prevent small businesses caught in the net from having to register to pay VAT on sales throughout the EU.

So – where do you stand and what can you do about it? Find out now to make sure you start the New Year in full compliance with the law.