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Prepare for EU VAT changes, warns tax expert

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13th Jan 2014
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Businesses should be making preparations for changes to EU VAT on business to consumer supplies of e-services, broadcasting and telecoms, according to Debra Dougal, VAT partner at Haslers.

Speaking at the UK200 annual conference in Edinburgh, Dougal echoed HMRC’s recent warning that those potentially affected by this “significant change” need to get ready now.

Businesses affected by the change might include those providing ‘downloadables’ including e-journals, e-books and other forms of electronic, downloadble communication to non-business customers in a different EU state from business. Business-to-business VAT charges remain unchanged.

The changes mean that business to consumer supplies of electronic services, broadcasting and telecommunications will no longer be taxable from where the business is based, but from 1 January 2015 will be determined by the customer’s location.

Dougal advised that businesses providing these services have one of two options: Register for VAT in each member state where it has customers or sign up for HMRC’s optional Mini One Stop Shop (MOSS).

The MOSS allows the business to register for VAT in one particular EU member state and there are two versions of the scheme: The union MOSS for EU business and non-union MOSS for non-EU business.

EU businesses don't choose which member state to register for the MOSS in as they must register where they are already VAT registered.

The MOSS' advantage is that the business is registered with one authority, one currency declaration and its familiar, as you must choose the same member state as where your business is registered.

But the disadvantages include no recovery of VAT on costs, fixed calendar quarter returns, a 10-year requirement to keep records and penalties apply in the member state of consumption. You can also be quarantined or excluded for non-compliance.

If a a business does opt for the MOSS, it will then need to keep records about the range of electronic services they supply, along with records of customers and where they are located.

According to the Revenue, records will need to consider a multitude of elements in order to complete the VAT MOSS return to the relevant EU tax authority, including:

  • Who provides the service
  • Status of customer and whether they are a non-taxable person
  • Decide upon place of consumption
  • Keep evidence to support decision on place of consumption (i.e. customer’s billing address or bank details)

The scheme opens for registration in October, but Dougal added that accountants should be preparing for clients potentially affected by it “from January”.

Replies (2)

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By User deleted
13th Jan 2014 16:09

How to enforce ...

'.. Businesses affected by the change might include those providing ‘downloadables’ including e-journals, e-books and other forms of electronic, downloadble communication to non-business customers in a different EU state from business ..'

'.. business to consumer supplies of electronic services, broadcasting and telecommunications will no longer be taxable from where the business is based, but from 1 January 2015 will be determined by the customer’s location ..'

A subsidiary operating outside the EU providing downloads to customers in the UK - how is the VAT enforceable?

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Replying to Matrix:
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By mbdx7ja2
13th Jan 2014 17:05

Strictly...

...they should be already - under the VOES scheme.

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