I hope by now all tax advisers know not to rely solely on the UK VAT registration threshold to decide whether clients need advice about VAT. If you look here instead you will see that, for some clients, the threshold is actually zero.
“For cross border supplies of digital services there is no registration threshold and VAT is charged at the rate due in the consumer’s country.”
If your clients are selling downloads, web hosting, eBooks, PDFs, MP3s or online courses to non-business customers they fall under this legislation and you need to review their VAT status.
So what guidance is there in the newly published VAT Notes 2016 Issue 1? There is a promising subheading: “VAT MOSS - simplifications for businesses trading below the VAT registration threshold” but the substance is merely a link to the Revenue and Customs Brief 4 (2016) issued in January and updated in February.
The news isn’t all bad, and perhaps now’s the time for a quick summary of the issues and where we stand.
Author Corey Doctorow famously tweeted that his first VAT MOSS return had cost him over £700 in software and accounting fees to calculate that he owed £18.74. In the TIIN for the changes (page A113 here) HMRC foolishly assessed the likely burden as about £40 a year for businesses already in the VAT system and £220 a year for the mere 5,000 small and micro businesses they thought might be affected...
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About Wendy Bradley
Wendy Bradley is a retired tax inspector, now working as a freelance journalist.