UK ejects microbusinesses from VAT MOSS

Mon 15th Feb 2016

The UK’s tax authorities has begun the process of striking off some micro-businesses from the UK’s EU MOSS reporting regime for sales of digital services to consumers across Europe.  Such companies will no longer be required to report EU VAT on their sales to consumers across Europe following an outcry around the heavy admin burden imposed since the 2015 rule changes.

It is estimated that 3,000 such businesses will be affected.

MOSS imposes VAT compliance on micro-businesses

The new Mini One-Stop-Shop regime was introduced on 1 January 2015. From that date, EU businesses selling electronic, broadcast or telephonic (e-services) to consumers had to charge the VAT rate of their consumers’ countries. Previously, they simply charged their own national VAT rate and reported all sales and VAT through their domestic VAT returns.

Following the introduction of the new rule, MOSS report portals was launched to enable e-service providers to make just one single, quarterly return for all 27 foreign member states.

This however created problems for micro-businesses in the UK with its relatively high national VAT registration threshold of £82,000 per annum. The new 2015 rules forced many businesses below the UK threshold to register for the first time to report relatively minor amounts for cross-border sales.

EU reluctant to grant VAT registration threshold

Following attempts last year to introduce a registration threshold for MOSS, the UK’s HMRC has instead decided to deregister many small micro-businesses from the start of 2016. They are to be treated as ‘hobbyists’ and not a business activity for VAT purposes.