Fundamental changes to the VAT accounting treatment for suppliers of digital services (broadcasting, telecommunications and wider e-services) will come into effect from next year and will impact UK businesses making such supplies to private individuals (‘consumers’) across the EU.
Online trading by Welsh businesses is an area of huge growth potential - whether we are talking about entrepreneurs creating innovative downloaded applications (apps), the education sector delivering courses over the internet, or auctioneers trading online.
System changes can and do take time to evaluate and implement so, with only four months until the changes come into force, businesses across Wales need to review the impact they could have and double check the actions that they need to take.
Here is some of the key information which businesses need to consider when looking at these changes and how they will impact them from January 1, 2015:
• ‘Digital services’ broadly includes the supply of television and radio programmes, fixed and mobile telephony, fax and connection to the internet and supplying video on demand, downloaded applications (or ‘apps’), music downloads, ebooks, anti-virus software, gaming services and online auction services
• At the moment, VAT registered UK suppliers of digital services to consumers in other member states will charge UK VAT at the standard rate (currently 20 per cent) and record and pay this via their UK VAT return in the normal way
• From 2015, all suppliers of digital services (there will be no ‘turnover threshold’, it will apply to all businesses, regardless of turnover) will be required to register, account for and pay local VAT based on the location of the consumer eg if a company’s customer is in France, then it will be the French VAT rate and rules which will apply. Including the UK, there are currently 28 EU Member States and if you supply all of them, a registration will be required in every country where you have consumers
• However, as an alternative, suppliers can use a Mini One Stop Shop (‘MOSS’) which in the UK is an HMRC online option which will allow businesses to submit a single quarterly return for the local VAT due in other member states. Payment of the VAT will be made through the MOSS system and then passed on by HMRC to the relevant EU Member state. Businesses will be able to register for MOSS from October 1, 2014, and the online service will be available to use from January 1, 2015
• It is possible that many suppliers will deliver digital services to consumers through an online portal, gateway or marketplace in which case it is possible that the platform operator will be seen as making the supply directly to the consumer and is, therefore, responsible for the related VAT implications. It would be prudent to check the actual position but typically where a platform operator sets the general T&Cs, authorises payment or delivery, or doesn’t clearly supply your name on any invoices or receipts given to consumers, then they will be responsible for paying the VAT and related VAT compliance obligations
If anyone is unsure about any of the issues mentioned above, Centurion VAT Specialists has a number of VAT updates planned for the autumn which will help businesses prepare and plan for the required changes. A full list of dates and venues for the training is available online at www.centurionvat.com/training/
HMRC has posted a useful online guide for anyone who wants more information http://www.online-web-presentations.com/HMRC/.