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Exclusive: HMRC Update on VAT MOSS

Following a successful first discussion with HMRC and HM Treasury last week, Enterprise Nation and a representative from the VAT MOSS group re-visited government officials for an update and to provide clarity on the position ahead of VAT MOSS coming into effect on 1st January.

This morning the group met Mike Cunningham (HM Treasury) and Andrew Webb (HMRC), who are leading the work on VAT MOSS and communications with small business. Over the past week, Mike, Andrew and colleagues have worked tirelessly to improve the guidance and support for small business - responding directly to the call from the VAT MOSS campaign.

What we can provide clarity on today is as follows:

  • Guidance on what small businesses should do to register for VAT MOSS will be published by the end of this week. This will be published on the HMRC pages of gov.uk;
  • There will be additional guidance on what defines a digital service;
  • Guidance will clarify how a business can register voluntarily for VAT, and then for VAT MOSS, without having to charge VAT on its UK sales (i.e. the new arrangements do not threaten the UK's current high VAT registration threshold);
  • Registering voluntarily for VAT will only involve filing a quarterly 'nil' return - it is only the VAT MOSS return that then needs to be completed to reflect cross-border trade in the quarter;
  • A benefit of registering voluntarily for VAT is that a business can choose, if it so wishes, to claim VAT incurred on expenses related to cross border trade (instead of filing a 'nil' return), and therefore potentially get some tax back against EU sales on which VAT will be separately payable through VAT MOSS;
  • HMRC has clarified that small businesses carrying out cross border trade will not have to register for MOSS by 31st December. Provided a business notifies HMRC by the 10th day of the month following the month in which they make their first cross-border supply, HMRC will back-date the registration to the date the digital supply was made. For example, if a business makes a sale to the EU on 19th January, it will have until 10th February to notify HMRC and register for VAT MOSS;
  • When it comes to record-keeping, small businesses will only have to collect and keep two pieces of data;

In addition, HMRC will allow businesses who use payment service providers:

a) to ask the customer in which Member State they are resident at the point of sale; and subsequently
b) to review data provided by the payment service provider (normally billing address and Member State where bank or credit card is registered)

Provided the above tallies and the business records this information, that is all the business will need to do. HMRC confirmed that payment providers are working to ensure this happens as seamlessly as possible;

  • A central EU information portal containing all Member States VAT rates and other requirements is available now and will make reporting easier for small business;
  • HMRC will continue to review the VAT MOSS guidance, and to ensure this takes into account the view of small business. Representatives from the VAT MOSS campaigning group will be invited to join a small business panel of representatives feeding into this guidance and any further evaluation about how these arrangements are working in practice.

We hope you will agree this provides absolute clarity on how small businesses can now prepare and be ready for VAT MOSS. HM Treasury has agreed to work with Enterprise Nation to monitor the impact of VAT MOSS and report on this at EU level in 2015, as part of any ongoing and wider debate on VAT and cross-border issues. With sincere thanks to HMRC and HM Treasury for the rapid response to the concerns raised by small business on the information and guidance around this new law coming into effect.

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