VAT man makes MOSS more business-friendly

The taxman is being cheered for saving suppliers who must register for European VAT on e-services from having to charge clients UK VAT, as long as their turnover is below £81,000.

The only question is whether this “common sense approach” by HM Revenue & Customs can be achieved without explicit provision in legislation, said the Chartered Institute of Taxation.

The institute explained that HMRC has amended the MOSS so that traders operating below the UK VAT threshold can separate their sales to UK clients from sales to other EU clients.

Before the change, announced last week in HMRC Brief 46, a trader needed to be locally VAT-registered in order to use MOSS (a simplification tool for new VAT rules) in the UK.

But this would have meant that the trader’s entire turnover would be subject to VAT and they would effectively lose the benefit of the UK registration threshold.

Instead, businesses with turnover below the VAT registration threshold will now be able to VAT register for MOSS in the UK and maintain the benefit of the threshold for UK supplies.

HMRC confirmed: “It is a condition of registering for MOSS that you must have a UK VAT registration number to identify the business, [but] you will not lose your UK VAT registration threshold.”

Patrick Stevens, tax policy director at the CIOT, said the amendment meant that micro-businesses supplying digital services to EU consumers from the UK would no longer be ‘handicapped.’

He also welcomed fresh guidance on the rules from HMRC, specifically on what supplies would cause a trader to have to either register in other EU member states or with MOSS.

“However our concerns have not been entirely allayed,” Mr Stevens cautioned. “The current wording of the legislation means it is open to interpretation and will likely result in a situation whereby the separation of UK and EU sales will arise through HMRC concession rather than through proper legislative provision.”

He added: “This likely scenario is yet another reminder of the pitfalls of legislation, poorly designed in the first place, and thus subsequently requiring future concessions to mitigate the liabilities of affected taxpayers. This undermines the law and is deeply damaging to the sense of certainty businesses are looking for; lest we forget concessions can be withdrawn at the whim of the Revenue.”

Editor's Note: Related Reading -

Contractors' Questions: Will VAT rule changes catch my software firm?

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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