Our client is a chef and has built up a successful website subscription service supplied to individuals. In return for the subscription payments, customers can sign in to the website, download PDF recipe cards, watch pre-recorded content and receive other digital services.
They have been successful in the UK for some time, but sales of subscriptions to individuals within the EU are ever increasing and have just breached the £8,818 VAT MOSS threshold. They registered for VAT MOSS last month, but they have asked us the question about what happens if the UK leaves the EU without a deal?
To firstly give some background, there are special rules surrounding B2C supplies of electronically supplied digital services. The general rule for B2C services is that the place of supply is where the supplier belongs; however, for B2C digital services, the place of supply is where the customer belongs.
As a consumer cannot reverse charge a transaction, ordinarily this would give the supplier a registration issue in the member state to which they have supplied their digital service. Whilst they can still choose to register in any member state in which they supply digital services, the VAT MOSS (Mini One Stop Shop) was introduced to simplify the process, with one registration (typically within the member state you are established) to declare digital supplies made to consumers in all EU member states.
If we leave the EU without a deal, HMRC have confirmed that UK businesses will no longer be able to use the UK’s VAT MOSS service to declare sales of digital services.
The final UK VAT MOSS return period will run up to 31 December 2019; however only supplies made up to 31st October should be included on this return. The return must be submitted by 20 January 2020, and amendments can be made up until 14 February 2020.
After Brexit, UK suppliers of B2C digital services will have 2 options:
- Register for VAT MOSS in any EU member state (only one registration will be required)
- VAT register in each member state where you supply digital services to consumers
It’s important to note that the threshold of £8,818 that was introduced in January 2019, where businesses could treat the place of supply as being the UK where EU supplies did not exceed this threshold, will no longer apply, meaning VAT MOSS registration will be required as soon as the first sale is made in to any EU member state.
VAT MOSS registration will be required by the 10th day of the month following your first EU sale after Brexit. For example, if your first sale to an EU consumer after Brexit is 1st November 2019, you must have registered for VAT MOSS in a member state of your choosing by 10th December 2019. If your first EU sale is not until 12th December 2019, then your VAT MOSS registration must be done by 10th January 2020.
It would be advisable for our client to begin the
process of deciding on a suitable member state to register for VAT MOSS and
appoint an appropriate tax representative in that member state.[1]
[1] Reproduced with permission of Croner Taxwise