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2015 VAT Changes

Thu 18 Dec 14

Uk Briefing - VAT and Digital Supplies to Consumers

Background:

  • From 1st January 2015, for all 'digital' supplies to EU consumers, VAT will be due in the country of consumption rather than in the country where the supplier is based
  • The new rules dont just apply to companies like Amazon - they also apply to UK businesses making supplies to consumers in other EU member states. Example: where a UK consumer downloads an e-book onto their kindle, Amazon will in future pay VAT in the UK rather than Luxembourg where they are based.
  • These changes will protect over 5 billion of UK revenue and help many UK businesses who face unfair competition from low VAT competitors.
  • Many small and micro-businesses selling digital services have raised concerns about the impact on them. At £81,000, the UK has the most generous VAT registration threshold in the EU and over 2 million (around half) of UK businesses fall under this. The UK argued strongly for a cross-border threshold so that the smallest businesses would be outside the system, there was no support from other Member States or the Commission

Measures to help small and micro-businesses

There are several aspects that will be helpful to many businesses, but the situation could still potentially be more burdensome than pre-January 2015.

  • If a micro or small business trades through a third party platform or marketplace it will be the responsibility of the marketplace operator to account for the VAT.
  • Any small and micro-businesses selling digital services that are affected, can also opt to use the Mini One Stop Shop (MOSS) online service for supplies to consumers in other Member States. The Mini One Stop Shop (MOSS) allows businesses to account for all the VAT due throughout the EU via a single registration and simple process (HMRC's UK MOSS has been open since October 2014)
  • HMRC have confirmed that for those making 'digital' supplies to EU consumers this threshold still applies on UK activity and the Mini One stop shop is available for any cross border provision.
  • HMRC continues to provide guidance to all businesses, including via channels such as Twitter, to ensure they understand all their options

Where do I get further help and advice?

About the changes: www.gov.uk/vat-on-digital-services-in-the-eu

More detailed guidance: www.gov.uk/government/publications/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop

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