The place of supply of broadcasting, telecommunications, and electronic services is changing
If you make sales of services via the internet you may be supplying “broadcasting, telecommunications, or electronic (‘BTE’) services”. For instance, selling software (including apps) via the internet, selling downloads, and providing website hosting are supplies of electronic services.
The current position
1. If your customer “belongs” in another country outside the EU the supply of BTE services is deemed to take place in the customer’s country and so is outside the scope of VAT. This applies to business and non-business customers. (Note that there is a “use and enjoyment” override for broadcasting and telecommunications services where the services are actually consumed within the EU).
2. If your customer is a business customer who belongs in another EU country the supply of BTE services is deemed to take place in the customer’s country. The supply is outside the scope of UK VAT but it needs to be included on an EC Sales List and your VAT return. (The use and enjoyment override can also be applied if broadcasting or telecommunications services are actually consumed outside the EU)
3. If your customer is a non-business customer who belongs in another EU country the supply is deemed to take place in the UK and UK VAT is charged and accounted for in the same way as for any other UK sale.
From 1 January 2015
There are no changes for supplies made if conditions 1 or 2 above apply. However, if condition 3 applies the supply is deemed to be made in the EU country where the customer belongs. This means that if you supply these types of services to non-business customers in other EU countries you will be required to register for VAT in those countries and account for VAT to the authorities in each relevant country. These sales will no longer be included on UK VAT returns.
You are not entitled to a registration threshold in other EU countries, which means that you may have to register in other EU countries even if you do not have to register in the UK (because your UK sales are below the registration threshold). A single sale in another EU country may result in a liability to be registered for VAT in that country.
MOSS – the alternative to registering in other EU countries
HM Revenue & Customs are introducing the Mini One Stop Shop (MOSS) which is a means of declaring and paying the VAT arising in other EU countries. Using MOSS is not compulsory but most businesses will probably find that this is the most convenient way of meeting their VAT obligations in other EU countries. The registration for MOSS is completely separate from the usual registration procedure and only businesses that are VAT registered may apply for it.
MOSS returns are submitted for calendar quarters (and so may not correspond to the normal VAT periods). One return covers all the sales made in other EU countries for that quarter and one payment is made in sterling to HMRC. The VAT on each sale must be charged at the rate applicable in the country where it is deemed to be made.
MOSS is an online-only service and businesses will be able to register for it from 20 October 2014. However, the MOSS system will not become active until 1 January 2015.
What should you do now?
If you make sales of services via the internet you need to check whether the services fall into the definition of “broadcasting, telecommunications, and electronic services”.
If you supply these types of services to non-business customers in other EU countries you need to plan now how you will deal with the change that takes place on 1 January 2015. For instance: How will you identify sales in the relevant EU countries and apply the appropriate rates of VAT? Will you register for MOSS – and if not how will you manage VAT registrations in other EU countries?
More guidance on how to establish where your customers “belong” and what types of services are “electronic services” is in VAT Notice 741A Place of supply of services. If in doubt seek advice.
HMRC’s latest guidance to the changes and the Mini One Stop Shop is at: