The changes to e-trading into the EU started on 1st January 2015 and will have a big impact for any UK business selling business-to-consumer (B2C) to the EU. From 2015 digital services will taxed for VAT in the place of supply of the consumer. From then on a UK trader will have to charge and account for VAT in the EU country they are selling into for B2C. So an e-book sold to Germany is subject to German VAT, a download sold to Poland pays Polish VAT etc. So as not to have to register in individual EU countries there is an option to register for VAT with HMRC and then sue their Mini One Stop Shop (MOSS). Under MOSS a registered trader’s sales to the EU are essentially accounted for and paid to HMRC, which then settles with the other 27 EU countries. But there is a problem for a small e-trading business which is not currently VAT registered because it is below the UK compulsory VAT registration threshold, currently £81.000 p.a. The risk is registering with HMRC for VAT and MOSS, for e-trading with the EU, could arguably also make a business liable to VAT on its UK sales. HMRC in their Business Brief 46/14 in December 2014 said a business not registered and below the threshold could register for MOSS for EU sales and would “not need to account for and pay VAT on sales to your UK customers”. Either way any small UK business in e-trading sector needs to consider carefully the full VAT consequences of any e-trading with the EU.
Tax Barrister, Accountant