UK MOSS VAT update

Wed 13th Jan 2016

The UK’s HMRC has produced new guidance for ‘micro-businesses’ for compliance with the 2015 EU VAT changes on digital services. The aim is to help such businesses – below the UK’s VAT registration threshold of £82,000 per annum – understand their obligations and reduce their compliance burden.

1 Location of consumer for VAT

One of the most onerous burdens of the new rules introduced in January 2015 is the requirement to charge the VAT rate of the country of any EU customer. Cross-border digital services providers to EU consumers are now required to collect at least two pieces of non-conflicting location data to verify this. For the smallest traders, often reliant of their market platforms, this is not practical.

HMRC has now said that providers can instead use their ‘best judgment’ in identifying the location of their EU customers. This would mean just one piece of location data.

2 Exemption for hobbies

The guidance also states that such enterprises need only comply with the new Mini One-Stop-Shop VAT compliance regime when the taxable supply is provided in the course of a business. Hobbies, with infrequent activities, can therefore be excluded from MOSS registrations. Potentially, the smallest businesses may use this as a justification to not register and collect VAT from around the EU, or from local customers. HMRC plans to potentially deregister the smallest traders once a trading pattern has been established through their quarterly MOSS returns – although this only tracks foreign VAT sales, and overlooks actual takings through income tax returns, for example.

Registrations so far for the MOSS scheme have been disappointing – amounting to less than 20,000 across the whole of the EU. This compares to a potential target of 1 million set by the European Commission.