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B2B VAT on purchase of electronic services.

Why are there inconsistencies in VAT requirements between VATMOSS and UK entities for e-services?

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I run a business that is not VAT registered. We are below the threshold and it is an uneccesary complexity to voluntarily register for VAT.

We buy electronic services from GoDaddy (a domain name registrar) and Amazon Web Services (web hosting).

Both charge 20% VAT. At GoDaddy, if you enter a VAT ID, this is removed. I am not sure what happens at Amazon Web Services as their verification process is manual.

It is common knowledge that not being VAT registered means that we cannot reclaim VAT on purchases from other businesses in the UK (who are VAT registered). That is annoying and unfortunate.

What is not clear is how things work when dealing with international entities. Moreso when it is not immediately clear which entity you are dealing with.

GoDaddy have an EU prefixed VAT number attached to their invoices. As I understand that means that they are registered for VATMOSS and thus, as a business, technically we don't have to pay VAT (as outlined https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...).

Amazon Web Service on the other hand seems to have a more complex setup (https://aws.amazon.com/legal/aws-emea/#6) involving an established UK entity and UK VAT number.

This presents an inconsistency non VAT registered companies such as ourselves have to suck it up in relation to VAT registered UK businesses, but dont in relation to international VATMOSS registered businesses. Why is this?

Both companies are massive yet use different systems.

GoDaddy seems to have a GB VAT registration ID as well (https://vat-search.co.uk/ocvWG_GO+Daddy+Europe+Limited) but their invoices list the EU prefixed one. Given that their system is essentially a self monitored one whereby you specify if you should be paying VAT it seems subject to significant risk. Whilst they are using the VATMOSS ID I don't have to pay VAT yet if they start using their UK subsidiary (I don't know why they arn't) then all of a sudden I need to pay it..

To throw a further spanner in the works, other domain name registrars such as Namecheap.com do not charge VAT at all. As far as I can tell they are wholly USA based, and have no VAT registration ID covering the EU in any capacity. How/Why?

Replies (17)

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chips_at_mattersey
By Les Howard
07th Aug 2020 19:36

Complex VAT rules are applied differently in EU Member States than UK, and also applied differently by differently providers. Brexit will add to the variations!

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By paul.benny
08th Aug 2020 10:07

Cross-border supply of digital services is probably the most complex area of VAT.

A couple of observations from your post
- the domain registrar you mention probably should be registered for VAT but flies under the radar
- VAT MOSS is a scheme to simplify VAT compliance for businesses that have VAT obligations in multiple countries. It doesn't of itself affect the obligation to charge VAT.

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Replying to paul.benny:
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By thomasclowes
08th Aug 2020 10:53

True. The most complex area of a complex thing.

In relation to your points.

- Possibly but they are still a bug company, just not as massive as GoDaddy. I can't imagine its an oversight.

- That does not seem to be the case though. VATMOSS stops you needing a local presence in each member state. If they have a presence/local VAT number they charge VAT yet it seems that if they do not and are using VATMOSS then they are not required to charge VAT.

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Replying to thomasclowes:
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By paul.benny
08th Aug 2020 11:15

Perhaps you can you point me to the guidance to support your assertion that VATMOSS removes the requirement to charge VAT?

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Replying to paul.benny:
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By thomasclowes
08th Aug 2020 12:51

Apologies for a lack of clarity.

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...

This link indicates that the supplier is not required to charge VAT because the buyer is responsible for it.

That said this link (https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/va...) implies that this is not related to VATMOSS but more generally the rules on the place of supply.

If they dont charge it, my business doesn't have to pay it whereas with a standard VAT registered they charge the VAT (rightly so) but I can't get out of paying it (being under the threshold).

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Replying to thomasclowes:
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By paul.benny
08th Aug 2020 13:53

I think you have misunderstood.

If a business is liable to account for output VAT in a particular member state, it must normally register there. VATMOSS is a simplification which allows traders to make a single filing and payment with HMRC who in turn forward to the VAT authority in each country. It's a UK system but I would imagine there are similar schemes across the EU.

The only time that your non-VAT registered business isn't charged VAT is if it's being supplied by another non-VAT registered business.

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Replying to paul.benny:
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By thomasclowes
08th Aug 2020 18:19

Thanks for your persistence in making this clear.

I am clear on the premise of VATMOSS as a simplification tool but I am not clear on your final sentence. The links in my previous post(s) point to this not being the case. These VATMOSS registered companies seemingly do NOT have to charge businesses VAT as those businesses are meant to handle the VAT themselves with the reverse charge.

This is the crux of my whole query - these suppliers do not have to charge verifiable businesses VAT yet businesses (like mine) under the VAT threshold don't need to file VAT returns.

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Replying to thomasclowes:
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By paul.benny
08th Aug 2020 19:02

If you were VAT registered in the UK, a VAT-registered business in another EU member state would be able to zero-rate supplies to you; you in turn would reverse charge and account for input and output tax. VATMOSS is not relevant here as the supplier has no foreign VAT to account for.

As you're not VAT registered, you're in the same position as a consumer: the supplier must charge you VAT. If the supplies are of services across borders, they potentially have a liability in the customer's member state. They can may account for this by utilising the local equivalent of VATMOSS - or by registering in their customers' member states.

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Replying to paul.benny:
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By thomasclowes
08th Aug 2020 20:26

The only part I am not 100% on is this: "As you're not VAT registered, you're in the same position as a consumer"

The HMRC guidance is unclear and inconsistent.

This guidance (https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/va...) agrees with you that you have to be VAT registered to be deemed a ‘relevant business person’.

Yet, this guidance (https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...) states:

"It is your decision whether to accept alternative evidence that the customer is in business and your customer cannot ask you to treat a supply as business-to-business if they have not given a valid VRN."

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Replying to thomasclowes:
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By paul.benny
09th Aug 2020 08:12

thomasclowes wrote:

The HMRC guidance is unclear and inconsistent.

No it's not.

Well, it might be a touch unclear because of the double negative. But I'm 100% clear that I must apply the same VAT treatment to businesses that are not VAT-registered as I do to consumers.

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Replying to paul.benny:
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By Matrix
09th Aug 2020 08:47

You are allowed to rely on alternative evidence that the customer is in business if they are not VAT registered. So a non VAT registered business could have different treatment if they purchased hosting from a non UK supplier and a UK supplier.

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Replying to Matrix:
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By thomasclowes
09th Aug 2020 08:58

That was my understanding which is why it is vital that in any such case a supplier with an overseas HQ needs to be overtly clear as to whether they are selling from that HQ or a UK based subsidiary.. right?

But there is still the issue of my previous response containing HMRC guidance that is contradictory on this matter.

Thanks

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Replying to thomasclowes:
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By Matrix
09th Aug 2020 09:07

It is not contradictory. A non VAT registered business can be B2B under both links.

There was a recent thread on Apple. A lot of these companies’ infrastructure is set up for B2C and not B2B and in practice if you don’t have a VAT no. you probably would be treated B2C.

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Replying to Matrix:
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By thomasclowes
09th Aug 2020 16:00

Thanks.

I am assuming it is non contradictory because of 'a taxable person within the scope of Article 9 of the Principal VAT Directive'?

I found the Apple post. Thanks for that. (I assume you meant https://www.accountingweb.co.uk/any-answers/apple-apps-charge-20-eu-vat-...?)

Its not so much that I expect either company to actually care/do anything, but I just want to be clear that my understanding is correct.

In the case of GoDaddy for example them charging me VAT unnecessarily makes them 20% less competitive compared to other US companies who don't charge VAT so arguably it is in their interest to get it right.

Another interesting thing is that it is self policed - you just have to enter a 9 digit VAT ID. 000000000 is accepted. If legally I don't have to pay VAT I'll just do that. Hence my desire to check that I am right first.

Thanks again.

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