Businesses supplying telecommunications, broadcasting and e-services directly to consumers (as opposed to other businesses) will have some planning to do ahead of January 2021. Taxpayers using the Mini One Stop Shop scheme (MOSS) should read this article and take urgent action.
No Deal Brexit – VAT and “digital services”
Since its introduction in January 2015, MOSS has been a useful simplification for businesses, allowing for a single registration in one EU country through which VAT liabilities due to any other EU country could be settled. Without MOSS, a business making these particular supplies to different EU customers might have needed multiple VAT registrations across Europe.
When the Brexit transition period comes to an end, the UK will no longer be able to use MOSS. This will impact UK businesses as well as any non-EU business that used HM Revenue & Customs to register as a “Non-Union MOSS member”.
UK Businesses (a “Union VAT MOSS Scheme Member”)
Union members will no longer be able to report their EU Sales under MOSS and should look to register in a different EU member state as a Non-Union member. This must be done by the 10th day of the month following the date of your first sale. For most businesses who are already using the scheme and are making supplies across the EU, this will mean registering no later than 10 February 2021.
Non-EU Businesses (a “Non-Union VAT MOSS Scheme Member”)
Businesses who are outside of the EU that used HMRC in the UK to account for VAT on their EU digital supplies will probably have two new registrations to make come 1 January 2021.
Similar to UK businesses, these companies will have to register in another EU member state as a Non-Union member if they wish to continue to take advantage of the scheme.
However, these businesses will no longer be able to report their UK sales on their Non-Union MOSS return. Consequently, they will also have to register for UK VAT and report UK sales on a UK VAT return. This registration should be in place within 30 days of the first UK sale.
What should you do now?
Businesses can continue to use the existing schemes up to 31 December 2020 and most will submit their final MOSS return to HMRC no later than 21 January 2021. It goes without saying that the rules and requirements remain unchanged during this time and taxpayers should keep all the usual records and charge VAT at the usual rates.
UK businesses are not allowed to register as a Non-Union member until 1 January 2021 and therefore no advanced registrations can be made. Both UK and Non-EU businesses should take advice and research the costs associated with the additional registrations and ongoing compliance. You must be ready to register in the first week of January 2021 to avoid potential penalties.
Is there anything else?
If you receive a refund after leaving MOSS that relates to a sale reported under MOSS, there will be a VAT adjustment required. There is a mechanism in place to allow for special filings up to 21 January 2022 to deal with refunds and other corrections. Businesses will be expected to monitor this and be prepared to make the correct filings if needed.
For more information on MOSS or how Brexit might impact the tax affairs of your business, please contact us.