HM Revenue and Customs (HMRC) has issued detailed guidance to suppliers of digital services regarding VAT changes set to take effect on 1st January 2015.
Any business which offers broadcasting or electronic services – such as websites, website hosting, apps and e-books – to European Union (EU) consumers will be forced to pay VAT at the local rate payable in the customer’s country, as opposed to UK rates.
For example, a UK firm selling mobile apps to consumers in Ireland will have to charge 23 per cent Irish VAT from 1st January 2015, with the figure payable to the Irish tax authorities.
Suppliers must therefore be in a position to account for VAT in each EU member state where a customer consumes their service; even if they are not currently registered for VAT in the UK as they do not earn enough to meet the VAT threshold.
HMRC is introducing a Mini One Stop Shop (MOSS), designed to help businesses account for all non-UK VAT on a single return submitted each calendar quarter and make the necessary payment to HMRC. Payments are made electronically but cannot be paid by direct debit.
Evading VAT payments is a criminal offence and business owners face demands for payment or arrest when entering a country where tax is overdue.
All UK digital service suppliers must declare all relevant broadcasting, telecommunication or electronic (BTE) sales via a MOSS registration or acquire separate VAT registrations in each EU country where it sells BTE services. This is regardless of whether they already have a VAT number in a country where it is not established.
Image: Johan Larsson
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