As of 1st January 2015, a new regulation has come into place where VAT on digital products sold in the EU is chargeable in the place of purchase rather than the place of supply. VAT Mini One Stop Shop (MOSS) has been introduced to stop large corporations diverting sales through low-VAT countries. However, regardless of size, if you are selling digital products such as downloads, web hosting, eBooks, PDFs, MP3s or online courses to non-business customers, you may need to review your VAT status.
One of the main burdens to the new regulation is the administration aspect. It can be costly and figures seem to vary from business to business with numerous examples of trivial payments being outweighed by the costs of making them. Overall, VAT MOSS for small businesses has a very steep learning curve so getting guidance on filingit correctly is imperative.
As well as the initial and continual administration that comes with VAT MOSS, you have to keep an extensive list of records for ten years. HMRC can request to see them at any time and you must therefore have them available to send electronically if required to do so.
All businesses should register VAT MOSS in order to get into the MOSS system. However, small businesses should select a category of registration which lets them into MOSS but does not require them to apply VAT to their UK sales unless and until they reach the £83,000 limit. Even if you do not make £83,000, you still need to make nil returns every quarter for mainstream VAT as well as completing the MOSS returns form.
Selling something electronically via a website download can make it difficult to know where the customer is located and can prove to be difficult for small businesses to find.
Despite normally requiring two pieces of non-contradictory location information, HMRC have declared that small businesses below the £83,000 VAT threshold will only have to provide one piece of evidence and this is to continue indefinitely.
VAT MOSS is a complicated subject and it is important that you have a full understanding of how it applies to you and your business. Do not hesitate to contact Evans Weir for further information and guidance on the subject.