Do you supply broadcasting, telecommunications or electronically supplied services to non-VAT registered customers (business to consumer ‘B2C’ sales) in other EU member states?
If so, you need to start preparing for a significant change to the VAT rules which will come into effect on 1 January 2015.
Under the current rules, the place where these supplies take place is determined by the supplier’s location. From 1 January 2015, this will shift to the customer’s location. The main consequence of this is that the supplier will have to charge and account for VAT at the prevailing rate in the customer’s member state and remit this VAT to the tax authorities in that member state.
This change presents enormous challenges for business. There are now 28 member states in the EU and VAT rates vary widely across the union. As a result, the potential compliance obligations are significant.
Ordinarily, there would be a requirement for suppliers to set up and operate a separate VAT registration in every EU member state where they make supplies affected by this change.
However, there is some good news in the form of the VAT Mini One Stop Shop. Read on for further details.
VAT Mini One Stop Shop (“VAT MOSS”)
Under the VAT MOSS scheme, HMRC will offer businesses the option of registering online in the UK in order to account for relevant supplies made in other EU member states.
Essentially, the VAT MOSS system will consist of a VAT return containing a separate box for each EU member state. Businesses will account for VAT on the value of relevant services supplied to customers in that member state at the VAT rate in force there. The business will make a single payment of VAT due to UK HMRC who, in turn, will remit the appropriate proportion of VAT declared to the tax authority in each member state.
What should I do if this affects my business?
This change will come into force in a little over 12 months’ time. In fact, registration under the VAT MOSS scheme will be possible from October 2014.
If you make supplies of broadcasting, telecoms or e-services to non-registered customers elsewhere in the EU, it’s vital you take action now. Examples of the types of service affected are set out in the box below.
The issues you will need to consider include:
- Ensuring your accounting system is able to cope with identifying and coding these supplies correctly
- Pricing (to take account of the need to pay VAT at different rates in different countries)
- Compliance issues including VAT MOSS registration if appropriate.
Examples of services affected by the 2015 changes include:
- Transmission of radio and TV programmes over a network
- Live broadcasts over the internet
- Fixed and mobile telephone services
- Provision of access to the internet
- Sale of apps
- Music downloads
- Online gaming
- Anti-virus software provided electronically
- Online auctions
If you are unsure what this means for your business, we strongly recommend you seek appropriate advice in good time to allow you to prepare for the changes. We would be delighted to talk to you if you think your business might be affected. You can contact us on 01484 538351 for an initial no-obligation chat.