The CIOT has welcomed HMRC’s adoption of its proposal to amend the VAT mini one-stop shop (MOSS) scheme so that businesses operating below the VAT threshold will be able to separate their sales to UK customers from sales to other EU customers, but warns that ‘uncertainty still remains’.
With EU regulations coming into effect next year make VAT on digital services chargeable in the location of the consumer, MOSS is designed to simplify the VAT accounting process for businesses providing digital services to multiple EU member states. However, in order to use MOSS in the UK, businesses are required to be locally VAT-registered, meaning that their entire turnover would be subject to VAT and they would effectively lose the benefit of the UK registration threshold even where they supplied a minimal amount of digital services to European consumers. HMRC announced last week that businesses with turnover below the VAT registration threshold would be able to VAT register for MOSS in the UK and maintain the benefit of the threshold for UK supplies.
CIOT tax policy director Patrick Stevens said: ‘We are happy to see HMRC has adopted a common sense approach. We also welcome HMRC’s guidance in Revenue and Customs Brief 46 (2014): VAT rule change and the VAT MOSS – additional guidance, which provides a much clearer explanation of what supplies would cause a business to have to either register in other EU member states or adopt the MOSS.
‘However, our concerns have not been entirely allayed. 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. 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.’
The CIOT has welcomed HMRC’s adoption of its proposal to amend the VAT mini one-stop shop (MOSS) scheme so that businesses operating below the VAT threshold will be able to separate their sales to UK customers from sales to other EU customers, but warns that ‘uncertainty still remains’.
With EU regulations coming into effect next year make VAT on digital services chargeable in the location of the consumer, MOSS is designed to simplify the VAT accounting process for businesses providing digital services to multiple EU member states. However, in order to use MOSS in the UK, businesses are required to be locally VAT-registered, meaning that their entire turnover would be subject to VAT and they would effectively lose the benefit of the UK registration threshold even where they supplied a minimal amount of digital services to European consumers. HMRC announced last week that businesses with turnover below the VAT registration threshold would be able to VAT register for MOSS in the UK and maintain the benefit of the threshold for UK supplies.
CIOT tax policy director Patrick Stevens said: ‘We are happy to see HMRC has adopted a common sense approach. We also welcome HMRC’s guidance in Revenue and Customs Brief 46 (2014): VAT rule change and the VAT MOSS – additional guidance, which provides a much clearer explanation of what supplies would cause a business to have to either register in other EU member states or adopt the MOSS.
‘However, our concerns have not been entirely allayed. 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. 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.’
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