An update on VAT MOSS

Furious at the upcoming changes regarding VAT on sales of digital services to non-business customers in the EU, many small businesses have taken their anger to social media as the surge in messages tagged #VATMOSS or #VATMESS can attest.

We mentioned the upcoming changes in a previous article but to recap, from 1st January 2015, if a UK business sells digital services (e.g. apps, music, e-books) to a consumer in the EU (B2C) then that UK business would normally need to register for VAT in the country of the consumer. To avoid having to register for VAT in multiple countries HMRC offer the Mini One Stop Shop (MOSS) where a UK business can declare their EU B2C digital service sales and pay the appropriate VAT to HMRC. MOSS returns are due quarterly to 31 March, 30 June etc and to be submitted, together with payment in the domestic currency, sterling for the UK MOSS, by the 20th of the following month.

The problem is that to be able to use MOSS a UK business must be registered for VAT in the UK. This lead to concerns that many unregistered businesses would now have to register in order to use MOSS, and be forced to charge VAT on their UK sales even though those sales are below the UK threshold.

UKTI Export Week starting next Monday

UK Trade & Investment will be holding its 6th Export Week during the week of 10-14 November. Across the week there will be a varied series of events all over the UK, aimed at businesses to either start their export journey or increase their international business. Previous Export Weeks have seen over 17,000 companies in the UK attend exporting focussed events. This week we will again have over 70 events across the UK; there will be at least one event per day in every part of the UK.

The flagship road show, ExploreExport, will be touring the entire country at 11 venues across England, Scotland, Wales and Northern Ireland. Over 120 UKTI Trade Officers worldwide will be available for 1-2-1 meetings on their dedicated markets to help companies “explore” the possibilities of exporting to their countries. The aim is to bring the world to all parts of the UK.

Mobile Apps Developement and VAT

Selling online is complex because once you reach a certain turnover in a foreign jurisdiction, you are required to register for VAT in that jurisdiction, start collecting VAT at the local rate and then pay VAT to the local jurisdiction (rather than HMRC). The threshold depends on the country and is either €35,000 or €100,000 (see full list there). Setting up the right infrastructure for distance selling requires that you are able to identify the location of your foreign clients and bill them appropriately. It is not always an easy task especially if you sell virtual goods or if you rely on a third party distribution platform such as the ones provided by mobile app vendors. Especially since each platform behaves differently. Here is a quick summary of what you need to know:

Apple AppStore

You supply your products to Apple, who then market and supply them to consumers. Apple charges VAT to the consumers based on their location. Apple’s commission is a markup to the price, which they then add VAT to. Because of this, under HMRC rules this isn’t deemed to be a supply of “agency services” from Apple to you. So you can account for VAT on your supply to Apple as normal. Because you are supplying software to Apple’s EU subsidiary, and because the subsidiary is based in Luxembourg, you can zero rate the VAT. You will have to report the sales onto an EC Sales list however. As with many things Apple, this model is very slick!