In our December 2014 article (click here to access) you may remember we advised that HMRC guidance was still evolving in the area.
We highlighted a potential trap if UK businesses that are not VAT registered (i.e. their annual sales fall below the £81,000) could be caught by the new VAT MOSS regulations.
The potential trap was that if they have to register for VAT MOSS by virtue of making supplies of digital services to consumers in the EU, they would have to register for UK VAT first, thus making all of their UK sales VATable too.
It has now become clear that a company in this situation can use VAT MOSS to account for VAT due in other EU states on its EU sales, but the business does not need to account for and pay VAT on its sales to UK customers. Likewise you cannot claim UK input tax.
If you fall in to this category, your unregistered business needs to register for HMRC online services and apply online for UK VAT registration. Then you need to add VAT MOSS as an additional service and select ‘Supplies of Digital Services (below UK VAT threshold)’. This can be done by searching for Digital Services when you are prompted to search for Business Activity.
Anything else ?
You must still submit quarterly UK returns, but they can be nil returns.
HMRC will automatically align your UK VAT return dates with the calendar quarterly VAT MOSS dates.
The potential VAT trap in our original web article has now been eliminated by HMRC and for a very minimal administrative effort initially, any non UK VAT registered businesses finding themselves having to submit VAT MOSS returns will not suffer any VAT consequences on their UK sales.