23 March 2018
People who provide services delivered through electronic means ('Electronic Services'), sold to final consumers based in other EU states, need to cope with the change of 'place of supply' rules from 1 January 2015.
Place of supply rules are one of the more hotly debated areas of VAT. They determine which nation state can collect consumption taxes, with a view to avoiding more than one state claiming tax on one supply (double-taxation) or no state claiming any tax on a supply. There are different rules for B2B and B2C which acknowledge the fact that business customers can self-account for VAT whereas private consumers do not pay VAT unless it is charged to them by the supplier. Beyond this distinction, there are several special rules.
The change in January 2015 relates to Electronic Services, namely ones that do not involve human intervention. Classics of this genre are downloads of music, video and literature material, but more complex interactive programmes, 'apps', broadcasting, and the like are also involved, and now make up a very substantial market.
Up until 1 January 2015 the place of supply in such cases is where the UK supplier belongs, so the supplier accounts for UK VAT irrespective of whether the customer is in the UK or in Spain. This all changes on 1 January, so that the home location of the private customer will be the place of supply, but the supplier must account for VAT in each state, since the customer is not able to do so. Technically speaking, this means that a UK business might need to register for VAT in every EU country in which it has such customers. But, thankfully, a system has been introduced which allows a single special registration to deal with all of these countries. This is called the Mini One Stop Shop ('*MOSS*') under which a business will submit a single return, detailing amounts of VAT owed to each country, and HMRC will forward the relevant sums to each member state in accordance with the data in the return. This does not stop the need to submit the normal UK VAT return containing all of the input tax and domestic output tax, since it only deals with the supplies to other EU states.
The portal is now open on the HMRC web site to allow such businesses to register for MOSS in time for the deadline of 1 January 2015.