Last year we wrote about the introduction of the VAT MOSS legislation. VAT MOSS is an EU VAT regulation that means sellers of digital goods have to account for VAT on such items at the rate relevant to the buyer’s location, not the seller’s.
Last week, HMRC released a briefing that will bring some new year cheer to small businesses who have been impacted by the introduction of VAT MOSS.
HMRC thinks some of the businesses are simply too small to be considered businesses, despite the fact that there is no £82k threshold under which VAT wasn’t payable in VAT MOSS. So while there’s no threshold, they suggest some may be just small businesses that fall outside of the regulations. Here’s what HMRC have to say:
“HMRC’s analysis of the VAT MOSS returns submitted by UK businesses so far indicate that some of those registered for VAT MOSS may not be in business for VAT purposes. HMRC will contact those already registered for VAT MOSS whose returns suggest they may not be in business.”
What does this mean for small businesses?
If you have been reporting under VAT MOSS you might receive a letter from HMRC indicating you don’t need to anymore.
HMRC have also further clarified what pieces of information a seller needs to collect and hold to verify the location. The original requirements involved two pieces of information, and there was a relaxation of that for year one. Now it seems businesses under the VAT £82k threshold only need to provide one piece of information and they can exercise their judgement on what that is.
“They (HMRC) are now going a step further and allowing businesses below the UK VAT registration threshold to exercise their best judgement. This means businesses can rely on any single piece of information, such as the address provided by the customer, to determine where their customer is located. This additional flexibility will provide additional help for businesses below the UK VAT registration threshold.”
See the full HMRC update here.
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