The VAT Mini One Stop Shop, or VAT MOSS is relevant to all businesses selling electronic services to consumers in any of the 28 EU countries.

This summary explains how to register and report digital supplies made in the EU, for small UK businesses (it is adapted from HMRC’s overview).

Digital supplies include, but are not limited to:

• Download and online games
• E-books (e.g. Amazon Kindle)
• Download and streaming music and videos
• Cloud computing, including software provided as a service
• Mobile phone services
• Internet telephony (e.g. Skype)
• Streaming television (e.g. Netflix)
• Broadcast television and radio

The VAT MOSS scheme is intended to simplify changes to VAT regulations from 1^st Janaury 2015, so that businesses only need to register for VAT in their own country.  If you do not use the VAT MOSS Scheme you must register for VAT in your customer’s country and comply with their VAT regulations.  There is no minimum value or reporting threshold, so any sale no matter how small must be reported.

If you are below the UK VAT registration threshold (currently £81,000) you can register for UK VAT to use the UK VAT MOSS. You can charge and account for VAT in respect of your EU cross-border B2C supplies but won’t have to charge and account for VAT on your UK domestic supplies. In addition, you will also be able to reclaim any VAT charged on business expenses directly related to your cross-border digital service supplies

Summary

If your business supplies digital services to consumers in the EU, you can register for HM Revenue and Customs (HMRC) VAT Mini One Stop Shop (VAT MOSS) scheme.

The Union VAT MOSS scheme is for businesses established in the EU including the UK.

Once you have registered for a UK VAT MOSS scheme, you submit, each calendar quarter, a single MOSS VAT Return and single VAT payment to HMRC.  HMRC will then forward the relevant parts of your return and payment to the tax authorities in the member state(s) where your consumers are located. This fulfils your VAT obligations. By using the VAT MOSS scheme, you won’t have to register for VAT in every EU member state where you make digital service supplies to consumers.

You also need to submit your usual VAT return.  If you do not meet the UK’s criteria for VAT registration, you can register voluntarily, submit your VAT MOSS returns once a quarter, and submit ‘nil’ domestic VAT returns.

Registration

To use the Union VAT MOSS scheme you need to be registered for UK VAT.

Once you have a VAT registration number, you use the same set of Government Gateway credentials to register for the Union VAT MOSS scheme using HMRC’s online services. You can use the VAT MOSS system to account for VAT on all your cross-border digital service supplies in member states where you don’t have an establishment.

If you do not want to have to register for VAT in other EU member states, you must register for VAT MOSS by the 10th day of the month following your first digital services supply. So, for example, if you make supplies on 8 July 2015 and want to use the VAT MOSS scheme to declare sales in the tax periods ending 30 September 2015, you must register by 10 August 2015. Your scheme registration will then be back-dated to the date of the first cross-border digital services sale on 8 July.

VAT MOSS de-registration

The VAT MOSS scheme is optional. If you decide to de-register from the scheme, tell HMRC using the online service, at least 15 days before the end of the calendar quarter in which you intend to stop using the scheme. For example, if you want to de-register from 1 July, you must tell HMRC before 15 June.

Once you’ve de-registered from the scheme you won’t be allowed to rejoin that scheme in any member state for 2 calendar quarters (normally starting after the first day of the next calendar quarter).  You may need to register for VAT in other EU countries if you are still selling electronic services to consumers.

VAT MOSS returns

The VAT MOSS scheme is used to account for VAT due on all supplies to consumers in member states where you have no establishments. VAT MOSS returns are calendar quarterly only. The deadlines for submitting your VAT MOSS returns are:

• 20 April for quarter ended 31 March
• 20 July for quarter ended 30 June
• 20 October for quarter ended 30 September
• 20 January for quarter ended 31 December

Union VAT MOSS returns

The return should be used to declare the VAT due on supplies of digital services you make to consumers in other member states where you have no establishments. Any VAT due on sales to UK consumers should be declared on your UK VAT Return.

Completing VAT MOSS returns

From 1 April 2015, you’ll be able to complete your return online. You’ll also be able to save partially completed returns on the online system before submitting your fully completed VAT MOSS Return.

1. Log on to VAT MOSS online service.
2. From the ‘At a glance’ screen, select ‘View VAT Mini One Stop Shop periods’.
3. Select ‘Create a new return’.
4. For the selected tax period, select ‘Submit a nil return’ or ‘Add taxable supplies of digital services from the UK (MSI)’ or where appropriate you can select ‘Add taxable supplies of digital services from the fixed establishments in other member states.’
5. Select a country from the drop down menu, enter the total value of supplies (excluding VAT) and the appropriate VAT rate (eg, standard VAT rate or reduced VAT rate). The VAT amount will be calculated automatically for you. If, due to rounding issues, it is different from the figure you have calculated, you can overwrite the VAT amount due.
6. Add a line for each member state in which you make supplies, with a separate line for standard and reduced VAT rates. The total amount of the return will be calculated automatically.

If a member state changes its VAT rate during a MOSS VAT Return period you will need to enter a separate line for each VAT rate charged in the quarter.

If you don’t make any digital supplies to any EU consumers in a quarter, you must submit a ‘nil return’.

Uploading VAT MOSS Return data

Instead of completing the return online you can download a template from the HMRC website and transfer data from your own system. You can then upload the data on to the VAT MOSS online service. HMRC will validate the information at the point of upload. You will still be able to save an uploaded return for submission later. HMRC will publish specific guidance for using the template early in 2015.

Exchange rates

If you charge or invoice consumers in other member states in a currency other than pound sterling, and you record that price in your business accounts in that currency, you must convert the amount into sterling at the end of each calendar quarter using the conversion rate published by the European Central Bank on the last working day of that quarter.

However, if you automatically convert the foreign currency into sterling using an agreed daily or other periodic rate and you record these sterling amounts in your business accounts, you may use these figures to complete your quarterly VAT MOSS Return.

Correcting a MOSS Return

To adjust your VAT MOSS Return you must submit a correction to the original return using the online service.

1. From the ‘At a glance’ screen select ‘View VAT Mini One Stop Shop periods’.
2. You will see a list of tax periods available for correction, select ‘View or amend return’.
3. Overwrite to increase or decrease the original return details – do not enter a minus figure.

You can make changes to your VAT MOSS Return up to 3 years and 20 days after the end of the relevant period.

MOSS payments

Once you have completed and submitted your quarterly MOSS VAT Return, you must electronically pay HMRC the total amount of the MOSS VAT Return.  You mustn’t send a combined payment for your VAT MOSS and your normal domestic VAT return.  A separate MOSS payment must be made, quoting the payment reference notified to you on submission of the declaration.

The bank account details for VAT MOSS payments will be available early in 2015.

Payment deadlines are:

• 20 April for quarter ended 31 March
• 20 July for quarter ended 30 June
• 20 October for quarter ended 30 September
• 20 January for quarter ended 31 December

Your payment must reach HMRC on the last working day before the weekend or a bank holiday. The time you need to allow depends on how you pay.

Union VAT MOSS scheme ways to pay:

• online CHAPS (Clearing House Automated Payment System)
• Bacs (Bankers automated clearing service)
• Faster Payments

Non-Union VAT MOSS scheme ways to pay:

You should advise your bank to pay HMRC electronically in pounds sterling, quoting the payment reference notified to you on submission of the declaration.

MOSS underpayments and overpayments

Underpayments

If you haven’t paid, or don’t pay the full amount, HMRC will email you a reminder on the 10th day following the day on which the payment was due. If full payment is still not received following the issue of the reminder, you may be required to make any further payments relating to that return directly to the member state concerned.

Overpayments

If you realise, or you are notified by a tax authority, that you have overpaid the VAT due to the member state(s) in which your consumers are based, that tax authority will refund the overpayment to you in its own currency.

Each member state tax authority operating their own VAT MOSS scheme can keep an administrative handling fee. This is a specified percentage of the VAT due to the other member state. The VAT MOSS tax authority (eg, HMRC for the UK) will deduct this fee before forwarding on the balance to the member state tax authority where the consumer lives. This means that if you have made an overpayment, both the tax authority in the member state of your consumer and HMRC will make separate refunds to you.

Union VAT MOSS scheme recovery of VAT business expenses (input tax)

Arrangements for normal UK VAT registered businesses

The VAT MOSS scheme only allows you to pay VAT on your sales of cross-border digital service supplies. If your business incurs any UK VAT related to those cross-border supplies, you should recover that VAT through your UK domestic VAT return.

Record keeping

A VAT MOSS registered business is required to keep records containing the following information:

• member state of consumption to which the service is supplied
• the date of the supply of the service
• the taxable amount indicating the currency used
• any subsequent increase or decrease or reduction of the taxable amount
• the VAT rate applied
• the amount of VAT payable and the currency used
• the date and amounts of payments received
• any payments on account received before the supply of service
• where an invoice is issued, the information contained on the invoice
• the name of the customer (where known)
• the information used to determine the place where the customer is established or has his permanent address or usually resides

The above information must be recorded in such a way that it can be made available by electronic means, without delay, and for each service supplied.

If you use the UK VAT MOSS scheme this does not of itself create a requirement to register as a data controller with the Information Commissioner’s Office (ICO). The normal rules apply which include an exemption for accounts and records, which covers basic customer information. If for any reason the information you hold goes beyond this you may like to check with the ICO if you need to register. Information can be found on the ICO website. If you should need to register the requirement to do so is based on your place of business, and not the location of your customers; so you (as a UK business) will only have to register with the ICO in the UK.

Support for MOSS registered micro-businesses until 30 June 2015

UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (VAT MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider. This means the business need not require further information to be supplied by the customer. As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides, the transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.

Compliance: audit and penalties

HMRC may conduct checks on your business to make sure you’re following the VAT MOSS rules and keeping appropriate records correctly. If you consistently don’t comply with the rules for the scheme, HMRC may exclude you from using the scheme. If this happens you will be sent a message through the online service, and you won’t be able to use the scheme anywhere in the EU for up to 2 years. This means that you will have to register for VAT in each of the EU member states where you make digital supplies to consumers. You will also have to make VAT Returns and VAT payments to each of those member states every quarter.

 

Audit

The tax authority of the member state where you make digital supplies to private consumers has the legal right to audit the records of a business registered for VAT MOSS. The Commission and the vast majority of member states have agreed an audit code of practice to minimise the risk of imposing unreasonable burdens on businesses. This means that normally the tax authority of your home member state will co-ordinate such audit requests and contact the business to discuss the scope and coverage of the audit requirements. It will be possible for an authorised tax official from another member state to attend any audit that is arranged, but the audit team will be led by a UK HMRC official.

Penalties

To resolve disputes and/or pay any penalties or fines, you will be expected to deal directly with the tax authorities in the relevant member state to which you make digital supplies and to make the payments using the currency designated by that member state.

 

You can appoint an accountant to act as your agent for VAT and prepare and submit VAT returns and VAT MOSS returns on your behalf.

Record-keeping

HM Revenue and Customs expect taxpayers and businesses to keep good records.  Later this year they will be launching a Business Record Checks programme, which will impose financial penalties for significant record-keeping failures.

HM Revenue and Customs can ask to see your business records at any time, but they are providing some help to ensure you get it right.  In advance of the programme launch they have introduced two basic fact sheets: one for business bookkeeping http://www.hmrc.gov.uk/factsheet/record-keeping.pdf, and another for records relating to tax returns, http://www.hmrc.gov.uk/sa/rk-bk1.pdf

Free bookkeeping advice is available from Businesslink, and can be accessed here: http://www.businesslink.gov.uk/recordkeeping.   Businesslink also provides an online tool to help you decide what information you need to keep.  http://www.businesslink.gov.uk/recordkeepingcheck

Offshore Bank Accounts

From 6^th April 2011 anyone avoiding tax by keeping money in offshore accounts could face penalties of up to 200% of any tax that should have been paid.  You must ensure that all income and capital gains arising offshore is declared, and the tax paid.

Corporation Tax

From 1^st April 2011 all companies will have to file their corporation tax returns online for any accounting period ending after 31^st March 2010.  Accounts and computations must be submitted with the tax return in iXBRL format.  Most companies will not notice any difference; many accountants file online already, and the rules for calculating corporation tax remain unchanged.  Tax payments will need to be paid electronically.

Class 2 National Insurance Payments

Self-employed people need to be aware of forthcoming changes to payments of Class 2 NIC. From April 2011, payments for your Class 2 National Insurance contributions will become due on 31 January and 31 July, the same as a Self Assessment tax bill.

If you currently pay quarterly the change will mean you will receive just two payment requests from HM Revenue & Customs (HMRC) in the year (instead of four bills), in October and April, showing payments due by 31 January and 31 July respectively. You do not need to wait until the due date to make payment.

If you pay monthly by direct debit, your payments will stop temporarily, then resume with the payment for April 2011 being taken in August 2011, and monthly thereafter.  There will be an option to pay 6 monthly (January and July),for those who do not want to spread their payments.

Changes to childcare costs

HM Revenue and Customs has issued a reminder to tax credits claimants, that they must let HM Revenue & Customs (HMRC) know within one month of their childcare costs falling or ending. Deliberately failing to let HMRC know when renewing a claim could constitute criminal fraud and result in prosecution.

HMRC will be using credit reference agencies and data matching to spot patterns of fraud. They are also employing more investigators and will investigate each claim in high-fraud areas.

The Equality Act 2010 has introduced a number of provisions, 90% of which came into force on 1^st October 2010.

Over the last four decades, discrimination legislation has played an important role in helping to make Britain a more equal society. However, the legislation was complex and, despite the progress that has been made, inequality and discrimination persist and progress on some issues has been stubbornly slow.

The Equality Act 2010  provides a new cross-cutting legislative framework to protect the rights of individuals and advance equality of opportunity for all; to update, simplify and strengthen the previous legislation; and to deliver a simple, modern and accessible framework of discrimination law which protects individuals from unfair treatment and promotes a fair and more equal society.

One aspect of this legislation is that employers are no longer able to ask questions about an applicant’s health before offering work, nor can they send out questionnaires containing questions about general health and medication issues with application forms. They cannot require applicants to have a medical assessment before they make a job offer.

Asking an applicant questions about past health, previous absences and sick days lost to work prior to any job offer being made is unlawful.

Before taking on any new employees, employers need to:

1. review recruitment and promotion processes and ensure they comply with the new requirements.
2. Update staff on the new requirements and make sure that all are aware of the prohibition on asking heath questions (apart from the few listed exceptions) and that they do not ask unlawful questions at an interview or initial meeting.
3. Remember that the prohibition on asking such questions applies even if the applicant raises the issue of their disability at the interview.

(source Croner Consulting)

George Osborne’s first budget announced a number of changes, including a prediction that the UK economy will grow at a slower rate than suggested by Alastair Darling in March this year.  The forecast for 2011 was 3.25%, but has been revised to 2.6%.

This summary concentrates on the main tax issues that may affect you.

The good news points for small businesses are the reduction in the corporation tax rate and the increase in the threshold for employer’s NIC.

Bad news includes a reduction in capital allowances, and an increase in the standard VAT rate.

Business Tax

Capital Gains Tax The much reported change in capital gains tax has been confirmed, but is not as bad as anticipated. The rate of 18% will remain, but there will be a second rate of 28% for higher rate taxpayers.  The tax-free limit has remained at £10,100.

The lifetime limit for entrepreneur’s relief will rise from £2m to £5m, and the effective rate will remain at 10%. Corporation Tax

The small profits rate will reduce by 1% to 20% for the financial year that runs from 1 April 2011 to 31 March 2012. The small profits rate applies where a single company has profits of no more than £300,000.

The main rate of corporation tax will also be reduced from 1^st April 2011 to 27%.  There will be reductions of 1% in the main rate in each of the years 2012/13, 2013/14 and 2014/15.

Capital Allowances

Capital allowances on plant and machinery will be reduced from 20% to 18% for items in the main pool.

The maximum amount of the Annual Investment Allowance is also being reduced to £25,000 per year.  This is unlikely to affect very small businesses, that don’t spend more than £25,000 per year on assets.

VAT

The standard VAT rate will increase to 20% on 4^th January 2011.  There is no change to the lower 5% rate, zero rated or exempt supplies.

HM Revenue and Customs have issued a detailed guide for VAT registered businesses

Income Tax and NIC

Employer’s NIC

From 6^th April 2011 the threshold at which employers start to pay Class 1 NICs will be increase by the rate of inflation plus £21 per week.  The level of inflation will be confirmed following the publication of the retail price index in September 2010.

New Employer NIC holiday

New businesses set up in certain regions from 22^nd June 2010 will benefit from a scheme in which they will not have to pay the first £5,000 of employer’s NIC. The North East of England is one of the regions covered by the scheme.

Income Tax

The government’s intention is to reduce the tax liability of lower paid workers, have no effect on employed and self-employed higher-rate taxpayers, and to help employers.

The personal tax allowance for those under the age of 65 will increase on 6^th April 2011 by £1,000, to £7,475.   For many people this will mean paying around £170 less tax during the tax year. Others who earn less than the value of the personal tax allowance will not pay tax.

The basic rate limit will be lowered so that higher rate tax payers do not benefit from the increase in the personal tax allowance.  The limit will be confirmed once the September retail price index figure is known.  This change will see more people becoming higher-rate taxpayers.

The personal allowance provides an amount of tax-free income for individuals earning money through employment or self-employment. Tax is then paid at basic rate on ear

nings above the personal allowance, up to the basic rate limit. Higher rate tax applies to earnings above the basic rate limit.

Pensions

The state pension is to be re-linked with earnings from April 2011.  Basic state pension will rise every year by the highest of earnings, inflation or 2.5%.

Tax Credits and Child Benefit

Families with an annual household income of more than £40,000 will have their eligibility to tax credits reduced from April 2011. Some elements of the tax credits system have been removed, and child benefits will be frozen for the next three years.

For help with these matters, or other tax and accountancy matters please contact us at www.collinsaccounts.co.uk/contact

HM Revenue and Customs (HMRC) have issued a guide to late payment penalties for all employers and contractors.  The penalties apply to periods starting on or after 6^th April 2010.  The full guidance is available on their website at www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm.

The penalties will be a percentage of the total amount that is late in the tax year.   The first overdue payment is excluded from this calculation, so if you only make one late payment, and it is less than 6 months overdue you shouldn’t be charged a penalty.   Subsequently the charges are 1% if 2 to 4 payments are late,  2% for 5 to 7 late payments, 3% for 8 to 10 late payments, and 4% for 11 or more.  Additional charges apply to payments over 6 months late.

To avoid a penalty you can pay on time, notify HMRC if there is no payment due, or contact them if you will have difficulty paying.