VAT Moss Scheme

Developments in modern technology and the spread of the internet have meant that changes were necessary to the previous rules on the supply of telecommunications, broadcasting and electronically supplied services. The changes were created to stop big businesses from profiting unfairly by establishing headquarters in lower-VAT countries.

However the new rules have had a major impact on UK based small businesses who sell digital products (e.g. e-books or online tuition) to other EU countries. The 'place of supply' of such services has now changed from the country where the supplier belongs to the country where the 'consumer' is established. Suppliers have then had to either register for VAT in every Member State where digitally delivered services supplies are made or make use of an EU-wide accounting system known as the 'mini one stop shop' (MOSS).

To make use of the MOSS scheme, a business will have to be registered for VAT even if their VAT taxable turnover is below the registration threshold of £83,000. MOSS returns will only be used to account for the supply of digitally delivered services supplies and will be submitted on a calendar quarterly basis within 20 days of the quarter end.

To reduce the new VAT liability the VAT on relevant purchases can be recovered. HMRC has also announced that it will accept VAT & MOSS registrations without requiring suppliers to charge VAT to their UK customers (up to the £83,000 threshold).

Talks are currently underway to introduce a threshold to exempt small businesses from the rules although it looks as though this is some way off at the moment.