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HMRC have issued detailed guidance to help businesses prepare for VAT changes in relation to supplies of digital services, set to take effect on 1 January 2015. It supplements European Union information published last month.
HMRC have issued detailed guidance to help businesses prepare for VAT changes in relation to supplies of digital services, set to take effect on 1 January 2015. It supplements European Union information published last month.
The changes will affect UK firms that supplies broadcasting, telecommunication or electronic (BTE) services to a non-business customer in another EU country that results in tax being payable in the customer’s country at the local rate, rather than in the UK.
A UK business selling software over the web to a private individual in Ireland will charge 23% Irish VAT from 1 January, and this amount will be payable to the Irish tax authorities.
Independent VAT consultant Neil Warren highlighted issues of particular importance to UK taxpayer firms selling digital services:
- Payments to HMRC through a mini-one stop shop (MOSS) registration – a single return submitted each calendar quarter to pay the overseas tax, therefore avoiding the need to separately register for VAT in each country – will be made electronically, but direct debit is not a payment option. The payment deadline will be the 20th day after the end of the calendar quarter: the first MOSS return to 31 March 2015 must be submitted and paid by 20 April 2015.
- Businesses must keep accounting records in relation to BTE sales for ten years after 31 December in the year in which the supply took place.
- MOSS returns can be corrected for only the previous three years, but there is still scope to amend entries for longer periods by direct liaison with the relevant overseas tax authority if the period of adjustment in that country’s domestic legislation exceeds three years – as in the UK, which has a four-year correction period.
- The EU tax authority forwarding MOSS payments to its overseas counterparts will retain 30% of the tax collected in the first two years and 15% for the next two until 31 December 2018. This means that if, for example, a UK business makes an error on a MOSS return and seeks a rebate of VAT by correcting the original return, the rebate will be repaid in parts by two different tax authorities for returns submitted to the end of 2018.
- A UK business must declare all of relevant BTE sales through a MOSS registration (or acquire separate VAT registrations in each EU country where it makes BTE supplies) even though it might already have a VAT number in a country where it is not established.
