Is Your Digital Business affected by VAT MOSS?

VAT Moss Overview

VAT MOSS stands for Mini One Stop Shop affecting digital services business providing services to consumers (B2C).  VAT MOSS means that when a business provides digital services to consumers, that business is responsible for charging VAT on the sale at the VAT rate that the buyer lives in.

What Does VAT MOSS avoid 

Normally in the UK businesses are not required to register for VAT until their turnover reaches the VAT registration threshold, currently £85,000 for 2017/2018.  Then once they are registered the rate of VAT charged, if at all, is related to the place of supply.  VAT MOSS turns the place of supply rule on its head, meaning the VAT rate applicable is the country in which the consumer lives.

In recent years, with digital services taking off, there was a trend arising where businesses began to locate themselves in lower VAT rated countries.  The meant if they were VAT registered, the VAT added to their digital services gave them the competitive edge over other businesses located in different European countries.

What Businesses are Affected by VAT MOSS

VAT MOSS affects larger businesses provided digital services like radio & TV streaming and telecommunication services such as mobile phones or internet access.  Crucially for small and micro businesses VAT MOSS also covers what HMRC calls Electronically Supplied Services which is things like:

  • eBooks
  • downloadable training courses
  • Music, games & films
  • online magazines
  • website supply or web hosting services
  • distance maintenance of programmes and equipment
  • supplies of software and software updates
  • advertising space on a website

What Exactly Does Electronically Supplied Services Mean?

In working out whether your business needs to register for VAT MOSS you need to work out whether your digital service are electronically supplied.

An electronically supplied service is one which is delivered automatically over the internet with minimal or no human intervention.

  • where the sale of the digital content is entirely automatic, for example, a consumer clicks the ‘Buy Now’ button on a website and either:
    • the content downloads onto the consumer’s device
    • the consumer receives an automated email containing the content
  • where the sale of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an e-service

All e-services that are electronically supplied in the ways outlined above are digital services and are covered by the VAT rule change.

HMRC has provided a sample list of elecontrinc supplies with guidance as to whether they would be covered by VAT MOSS or not. Here is a copy:

Service e-service Electronically
Covered by the rules
PDF document manually emailed by seller Yes No No
PDF document automatically emailed by seller’s system Yes Yes Yes
PDF document automatically downloaded from site Yes Yes Yes
Stock photographs available for automatic download Yes Yes Yes
Live webinar No No No
Online course consisting of pre-recorded videos and downloadable PDFs Yes Yes Yes
Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor Yes No No
Individually commissioned content sent in digital form, for example, photographs, reports, medical results Yes No No
Link to online content or download sent by manual email Yes Yes Yes

Source HMRC

VAT can be confusing and mistakes can be costly. The information contained in this website is for guidance and information purposes only. It should not be relied upon as professional accounting, tax and legal advice.  For specific advice relevant to your own situation, always contact a professional.