Minimum threshold set for VAT MOSS

Girl is reading ebook
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The regulations have now been passed to introduce a de-minimis turnover threshold for the VAT MOSS scheme from 1 January 2019.

The parliamentary process has now been completed to pass the regulations: VAT (Place of Supply of Services) (Supplies of Electronic, Telecommunication and Broadcasting Services) Order 2018 (SI 2018/1194). This means that any UK business making less than £8,818 of annual BTE (Broadcasting, Telecommunication, Electronic) sales to non-business (B2C) customers in other EU countries after 1 January 2019 will not need to register for VAT MOSS.

The business will continue to charge UK VAT on its fees if it is VAT registered in the UK, rather than having to register for MOSS and charge the VAT rate that applies in the customer’s country.

Background

Since 1 January 2015, the place of supply for BTE (digital) services sold to B2C consumers has been where the customer is based, rather than where the supplier is based. This carried with it a requirement to register for MOSS with HMRC, and account for VAT at the rate that applies in the customer’s country. There has been no de-minimis limit for such sales, ie a zero-turnover threshold.

Example 1

Dating Services charges subscribers £50 per month plus VAT to join its online service. All subscribers are private individuals (B2C) so the VAT rate charged depends on which EU country the customer is based in, because this is a BTE supply.  

New rules in 2019

From 1 January 2019, the place of supply for digital sales will be the supplier’s country as long as the following four conditions are all met:

  • The supplier of the service only belongs in one EU member state;
  • The services are supplied to EU consumers (B2C);
  • The total value of all BTE sales made to B2C EU customers is less than £8,818 on a calendar year basis; and
  • The total value of these sales was also less than £8,818 in the previous calendar year.

Example 2

Steve is an accountant and VAT registered in the UK. He has published a new book on FRS102 which can be bought as a digital download online for £75. He has received three orders for his ebook: from an Indian student in Mumbai, a Dutch student in Amsterdam, and a German firm of accountants. What is the VAT position for each of these sales?

If Steve delays the sale to the Dutch student until 1 January 2019 or later, he won’t have to register for VAT MOSS and account for Dutch VAT. This is because his calendar year sales in 2019 up to the time of the sale (and in total for the previous calendar year ie 2018) will be less than £8,818.

There is no VAT charged on the sale to the Indian student because she is based outside the EU (VAT Notice 741A, para 14.1). The sale to the German accountants is also outside the scope of UK VAT as it is a B2B sale (VAT Notice 741A, para 6.3), so the reverse charge will be declared on the customer’s German VAT return.

The numbers

Why is the turnover figure in the legislation such a precise amount of £8,818? It is actually €10,000 converted to sterling. There was criticism of this method when the draft regulation was published in September, but many in business and the profession prefer VAT thresholds to be quoted in sterling. The other important point is that the threshold works on a calendar year basis and not on a rolling 12-month basis, unlike our VAT registration test. Also, the figure of £8,818 excludes VAT.

Voluntary registration for MOSS

There might be occasions when a business wants to voluntarily register for MOSS, perhaps because the business has growth ambitions and wants to anticipate the MOSS accounting requirements in its early days of trading. But there might also be a tax saving opportunity if a UK business makes sales in a country with a lower VAT rate than ourselves, such as Luxembourg.

Brexit impact?

What will happen when the UK leaves the EU on 29 March 2019? This will obviously depend on the terms of the final deal, if it is passed and agreed. I’ll deal with that question in three months’ time!

About Neil Warren

Neil Warren

Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.

Replies

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30th Nov 2018 13:14

Thank for this Neil. Useful summary. Somewhat ridiculously, in your Steve example, if he printed the book out and sent it to the Dutch customer, he would presumably not have to charge VAT because physical books are zero rated whereas digital ones are not. And even if that were not the case in Holland, it wouldn't matter because the place of supply for the physical book would be the UK. Is that right? I love collecting stories of VAT madness!

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01st Dec 2018 15:34

Far too low

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03rd Dec 2018 10:10

The limit is ridiculously low, but at least I can put my e-book back on Amazon and once again watch the pennies roll very slowly into my bank account! (Let's just say it will be quite some time before the limit bothers me)

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03rd Dec 2018 11:14

Dealing with what happens in Brexit may be a little late! There is a real danger of an unforeseen problem in this mess depending on what happens in transition. It would seem that even under the transitional rules we cease to be a member of the EU per se on March 29th, this would mean that the benefit of the de minimis only exists for those 29 days! Will the team negotiating the transition even worry about these very minor matters? It is to be hoped they do.
But what happens if there is a 'no deal' Brexit which today still seems a real possibility. Not only would we lose the benefit of the de minimis but HMRC would not be able to accept a MOSS return on or after 31 March 2019 and any trader liable to make a return for that period would be in default. You could not join the Irish Non-union scheme is sufficient time as applications to join a Non-union scheme can only be accepted from those who are NOR members of the EU - so an Irish application could not be made until 30 March 2019 at the earliest. The consequences of being in default is that every member state who would have appeared on that return can independently penalise the trader. If in danger exploit the de minimis and deregister BEFORE 31 December 2018 may be wise advice for some.

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03rd Dec 2018 13:02

If you wouldn't normally be VAT registered in UK and only have a UK VAT registration due to VAT Moss, as long as your digital sales to EU are less than £8,818 and your total sales (including these digital sales) are less than £85k then presumably you can deregister from VAT Moss from 1 Jan 2019. Or would you advise waiting and seeing what happens due to Brexit, for the sake of 3 months? Presumably registration from outside the EU for VAT Moss doesn't have this small earnings threshold, as the supplier doesn't belong in an EU state? Thanks

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04th Dec 2018 09:22

so how about those who are already registered for VAT Moss but the sales is below 10,000 euros, does that mean we should deregister and just account Uk VAT?

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to Smalltalk
05th Dec 2018 09:27

Smalltalk wrote:

so how about those who are already registered for VAT Moss but the sales is below 10,000 euros, does that mean we should deregister and just account Uk VAT?

If we deregister, then how about 2018 last quarter submission, do we not submit at all ?

Or is there no way for those already in VATMoss to get out ?

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04th Dec 2018 09:43

Depending on the outcome of the "meaningful vote" in parliament on the 11th, if it looks like there will be a "no deal" brexit then getting out before 1 January if you can could be advisable...

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