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 1st 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.
- Log on to VAT MOSS online service.
- From the ‘At a glance’ screen, select ‘View VAT Mini One Stop Shop periods’.
- Select ‘Create a new return’.
- 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.’
- 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.
- 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.
- From the ‘At a glance’ screen select ‘View VAT Mini One Stop Shop periods’.
- You will see a list of tax periods available for correction, select ‘View or amend return’.
- 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.