From 1st January 2019, an EU wide change to the VAT place of supply rules will be implemented that will affect MOSS registered businesses who are established in the EU.
What is changing?
An £8,818 annual threshold (total value, exclusive of VAT) for cross border supplies of digital services to consumers in the EU will be introduced. If your annual cross border supplies of digital services to consumers is below this threshold in the current and preceding year, the supplies can be treated as being made in the UK instead of elsewhere in the EU. Businesses below the threshold will be able to charge UK VAT instead of VAT in the Member State of the consumer.
What do I need to do?
1. You need calculate the total value of your cross-border digital sales to EU consumers for the calendar year – 1 January 2018 to 31 December 2018.
If your sales exceed the £8,818 digital supply threshold in 2018, you don’t need to do anything. You can continue to use MOSS to report and pay VAT due in the Member State of the consumer.
If your sales are under the threshold in 2018 and you remain liable to be registerable for UK VAT then, after 31 December 2018, you can charge and account for UK VAT on your supplies of digital services to consumers inside the EU unless you exceed £8,818 during that calendar year (see point 2 below).
If you do not want to take advantage of the threshold, and want to continue to charge VAT across the EU, you can elect to do so (see ‘The Election’ below).
You may choose to deregister from MOSS if you don’t need to pay VAT in another Member State. Deregistration will take effect from the end of the current quarter unless it is done within 15 days of the end of the quarter. In that case, deregistration will take effect from the end of the following quarter. You will need to submit a nil return for quarters where you remain registered and under the digital supply threshold. This means you will need to complete a quarter one 2019 MOSS return if you deregister for MOSS between 1 January 2019 and the 15 March 2019.
If you deregister for MOSS you cannot re-register for next two calendar quarters. You can deregister from VAT MOSS by visiting HMRC’s online MOSS service (select “Change registration details” section).
If you are below the UK VAT registration threshold, you can also deregister from UK VAT and can stop charging VAT on your supplies.
2. You will need to monitor the value of your cross-border digital supplies throughout the year.
· If you exceed the threshold and are still registered for MOSS you should start charging, and accounting for, EU VAT on your cross border supplies of digital services using the MOSS return.
· If you exceed the threshold and are not registered for MOSS at that time, you will need to report and pay VAT due in other Member States by re-registering for MOSS (if you are able to) or registering for VAT in each Member State in which you make digital supplies.
The effect of making an election is that the threshold rules don’t apply and the place of supply remains where your consumer is based.
You must notify HMRC within 30 days of making the election at email@example.com. Please include ‘election’ in the email subject line.
The election has effect until the end of the second full calendar year after making the election. For example, if you make the election on 30 January 2019 the election applies until 31 December 2021.
Deregistering for UK VAT
If you are below the new digital services threshold and the total value of your digital sales, when combined with all other domestic sales, is below the UK VAT threshold, then your business is not obliged to register for, and charge, domestic VAT. You can cancel your business’s VAT registration by using HMRC’s online service or completing and sending us a VAT7 form. This will automatically cancel your VAT MOSS registration.
Please note that access to your online VAT MOSS account will remain open for up to 3 years so that you are able to submit missing VAT MOSS returns and correct those already submitted.
You can find guidance on the new rules at https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers.
The UK leaving the EU
We will update the blog to explain how UK VAT MOSS will change when the UK leaves the EU.
The digital services threshold only applies to businesses located in the EU. In the event the UK leaves the EU with no deal on 29 March 2019, the threshold will no longer apply to businesses based in the UK. UK businesses who want to continue to use VAT MOSS will need to register for the VAT MOSS non-Union scheme in an EU Member State. This can only be done after the date the UK leaves the EU.
You can find further information to help you prepare for EU Exit at VAT for businesses if there’s no Brexit deal.