VAT MOSS stands for Mini One Stop Shop. It is a VAT Scheme designed by HMRC to try to create a level playing field between digital services business of all sizes in the EU.
Here I help you work out whether or not you are affected. And if you are affected, show you:
- How you get registered for VAT MOSS;
- What you need to report to HMRC;
- Which records you need to keep;
- How you’re impacted by Making Tax Digital.
New guidelines post-Brexit have yet to be released by HMRC.
Who Needs to Register for VAT MOSS
VAT MOSS affects digital services business if you’re:
- based in the UK and supplying consumers in other EU member states;
- business is based outside of the EU but makes digital supplies to consumers in the EU.
If you meet either of these rules then your business is responsible for charging VAT on the sale at the VAT rate tha the buyer lives in.
Learn more: Is Your Digital Business Affected by VAT MOSS?
How to Register for VAT MOSS
Under VAT MOSS there are two ways to register your business and start collecting taxes:
- Register for VAT in each of the countries you supply digital services to and submit individual VAT returns and payments to each, in accordance with their individual rules;
- Register with HMRC for VAT MOSS and submit a single quarterly VAT return and payment. HMRC will then distribute the VAT you have collected it to each the countries you have sold your services to on your behalf.
Generally speaking, option number two of registering with HMRC in the UK is the simpler route.
Registration Deadline for VAT MOSS
You must register for VAT MOSS by the 10th day of the month after your first digital service sale.
If your first sale of digital services is on 8 February 2018, you must register by 10 March 2017.
Your VAT MOSS registration will be backdated to 8 January, the date of your first sale.
Registering with HMRC for VAT MOSS
Registering for VAT MOSS is fairly straightforward and you can do this online yourself.
If you are not already registered for UK VAT, then you will need to do this first. You can do this online HERE.
You’ll need to create an HMRC business online account. If you don’t already have one and there is more information here ‘How to Register for VAT Online‘.
Once your VAT Registration is completed head back into your HMRC business online account dashboard to begin your VAT MOSS registration process.
Choose the option to find a tax, duty or scheme:
Select the option to add ‘Another VAT Service’
Finally choose the following options – to add MOSS and that you are not already registered.
You will then enter the formal registration procedure for which you need to have the following information at the ready:
VAT MOSS Reporting Requirements
Once registered you are required to submit quarterly VAT MOSS returns via your HMRC business account by the following dates:
- 20 April – for first quarter ending 31 March
- 20 July – for second quarter ending 30 June
- 20 October – for third quarter ending 30 September
- 20 January – for fourth quarter ending 31 December
Submitting Your First VAT MOSS Return
If your business is below the UK VAT Registration Limit (currently £85,000) then you must remember to submit a nil UK VAT return within the VAT section of your online account.
Don’t forget because failure to do this may result in HMRC chasing you and issuing penalty notices.
Learn more: How to Submit a Nil VAT Return
How to Calculate How Much VAT to Pay
If you charge your customers a fixed rate, you’ll need to work out what portion of the money you have collected relates to VAT.
Here’s how you work that out.
Say you sell an ebook for £15 including VAT across the EU, the amount that relates to VAT will differ according to which member state your customer lives in.
Say your customer lives in Sweden where the VAT rate is 25%, you will need to multiply the sales price by the VAT fraction to work out how much VAT you have collected.
The VAT Factions is:
(100 + VAT rate) ÷ VAT rate = VAT fraction
So for Sweden the VAT Fraction is 5.
Thats means you’ll have collected VAT of £3 (£15 ÷ 5).
Claiming Back Input Tax on Purchases
When registered for VAT MOSS you’ll need to follow the rules on claiming back VAT on your purchases.
The amount you are allowed to reclaim depends on your business turnover.
You are Below the UK VAT Registration Threshold of £85,000
You cannot claim back the exact amount of input VAT according to what you have paid.
Instead, you claim a set percentage based on your UK/EU Sales.
Say for example 40% of your total turnover relates to EU sales, then you would be allowed to claim back 40% of your UK input tax.
You do this on your UK VAT return, instead of submitting it as a nil return.
You are Above the UK VAT Registration Threshold of £85,000
You can claim back 100% of your input VAT on your UK VAT Return.
As part of your quarterly reporting, you will need to summarise the
Keeping the right records will make accounting under VAT MOSS easier.
You should be keeping the following:
- details of the member state where you made the sales;
- the date you supplied a service;
- taxable amounts, including
- any increase or decrease of the taxable amount;
- VAT rate you applied;
- the amount of VAT due and the currency used;
- payments your business received – the dates and amounts;
- any payments on account your business received for services before you supplied them;
- invoices you issued;
- customer name –
- the information you used to work out where a customer is based.
You must keep this information for 10 years and be able to send it to HMRC electronically if asked.
Given the level of detailed involved, you will need to review your online payment system and decide whether you need an additional plugin to collect the information you need.
VAT MOSS and Making Tax Digital
Making Tax Digital is changing the way we file all our tax returns and pay taxes.
While VAT MOSS is outside the scope of Making Tax Digital, if you reclaim input VAT on a UK VAT return then you’ll need to make sure you follow the rules of Making Tax Digital.
Learn More: Making Tax Digital
Updated 14 April 2019