As you will probably be aware, on 1st January 2015 the way VAT is charged changed for businesses which sell digital services to consumers in EU member countries.
We wanted to give you a brief overview of how we are updating Clear Books to account for these changes.
What the changes are
- New regulations on VAT on digital services sold to consumers i.e. non business customers in other EU countries
- Digital services include:
- E-services: e.g. e-books, software downloads, video on demand, web hosting etc.
- Broadcasting – television or radio programs
- Telecommunications
- The place of supply is now the customer’s country, not the supplier’s country
- This means you must charge the customer the correct amount of VAT depending on their country
- You can also claim back UK VAT on purchases related to these services
- It affects all UK businesses even those not UK VAT registered
- These services will not appear on UK VAT returns
- Does not affect: sales to business, non-digital sales, sales within the same country, sales outside the EU
- VAT MOSS (Mini One Stop Shop) has been set up by HMRC so that businesses don’t have to register for VAT in each individual EU country in which they sell services. VAT MOSS allows you to make one single return, with HMRC allocating the tax to the respective countries. Find out more about registering here: https://www.gov.uk/register-and-use-the-vat-mini-one-stop-shop
- This is only the beginning, as it is intended that the same rules will be applied eventually to all other services and goods sold to EU consumers
What we’ve done already
- From 1st January 2015:
- You can mark an invoice with the “Sales of digital services to EU consumer” VAT treatment and manually fill in the appropriate VAT rate
- You can set up a VAT scheme for your company as “VAT registered for MOSS only” if you have to register for this scheme but would not be UK VAT registered otherwise
What we’re doing
- Approx. late January or early February
- VAT rates for the customer’s country will be automatically populated, so you don’t have to enter the rates manually
- Before March
- Report of all digital service invoices and submission through Clear Books to HMRC’s VAT MOSS service
For more information on VAT MOSS please see these resources below:
- https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers
- http://www.icaew.com/en/technical/tax/working-with-hmrc/vat-moss
- http://rachelandrew.co.uk/archives/tag/vat
If you have any questions, please leave a comment below, post in our community forum or contact our support team here
Another good reason for the UK to leave Europe!