HMRC have published draft legislation which will introduce changes proposed by the EU and ease the VAT burden for some businesses that provide e-services.
On 1 January 2015 the Place of supply of business to consumer (B2C) e-services was changed to where the recipient customer is based. This led to a number of businesses having an obligation to register for VAT in more than one European country.
To assist with this burden, the VAT Mini One Stop Shop (MOSS) was introduced, enabling the business affected to register for VAT MOSS in their home nation, file one VAT return and pay one VAT payment, which the home nation split between the various EU countries.
In December 2017, the EU proposed relaxations to assist smaller businesses further with the burden of VAT MOSS.
HMRC have now published a policy paper and are consulting on draft legislation which will introduce these EU proposals into the UK law.
From 1 January 2019 a B2C supply of e-services made to a customer belonging in another EU Member State, will be treated as taking place in the country where the supplier belongs (rather than where the customer belongs), if the following conditions are met:
- The total value excluding VAT, of B2C supplies of e-services made to customers belonging in other EU Member States, including the current supply, does not exceed £8,818 in the calendar year, and
- The total of those supplies did not exceed £8,818 in the previous calendar year.
In other words, as long as the total of these supplies is below £8,818 each calendar year, VAT MOSS will not be necessary and the supplies will be treated as UK supplies for UK businesses.
A business made £5,000 of B2C e-services to customers in other EU Member States in 2018.
It made a further £5,000 of these supplies in January 2019.
The business makes a B2C supply to a French customer of £3,500 net of VAT in June 2019. As the business has not made more than £8,818 of B2C e-services to other-EU Member State customers, including this supply, this £3,500 supply will be a UK supply.
The business makes a further B2C supply of £800 net of VAT in September 2019. As the total for the calendar year will now exceed £8,818, this £800 supply, and any further B2C e-services made to other EU Member States in the remainder of the calendar year, will have a place of supply where the customer belongs. The business can register for and use VAT MOSS to file the returns in relation to those e-services.
All B2C e-services made to customers of other EU Member States in calendar year 2020 will also be treated as made in the country the customer belongs due to the 2019 sales.
A business can elect to ignore the £8,818 threshold and treat all B2C e-services as made in the country where the recipient belongs. The election will only affect services taking place on or after the date of the election and it will last for the remainder of that calendar year and the following two calendar years.
Further draft legislation includes proposals to extend the VAT MOSS scheme to non-EU businesses who are already registered for UK VAT for other reasons and are making B2C e-services to other EU Member States in which they are not VAT registered.
The consultation on the draft legislation closes on 8 October 2018.