#VATMOSS advice for small & micro businesses in the UK from #SageOne

4 years ago

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On 1st January 2015, new legislation comes into force that affects the VAT on the sale of digital services to customers in other EU countries. This is known as ‘VAT MOSS’ or #VATMOSS on social media.

In a nutshell, if you supply ‘digital services’ to an individual customer (not a business) who is in another EU country, these new rules will apply to you.

Who is affected?

The services include broadcasting, telecommunications and electronic services. The legislation affects the rate at which VAT is accounted for on such transactions and the VAT Returns you need to submit. Unfortunately this also applies to non-VAT registered businesses who will need to charge their customer the local tax.

Under the new rules, when you sell digital services to customers in other EU countries, the VAT must be charged ‘in the country’ where the customer is based. (For example, if your business sells an online training course to a private individual based in Italy, you must charge the Italian VAT rate, which is currently 22%).

If this is the case, your business must either register for VAT and submit VAT Returns in each EU country you sell to, or alternatively, register for the VAT Mini One Stop Shop (MOSS) provided by HMRC.

I would suggest for anyone who needs to do this, and does not have many sales in any one particular EU country, the MOSS method would probably be the best option. If you are not already VAT registered, you will need to voluntarily register to take advantage of the MOSS service. However, you will not need to apply VAT to your UK sales, just on the services sold to customers in other EU countries.

The legislation documentation and all the information on this topic online can seem quite daunting if you’re a small or micro business. You may be worrying whether this legislation affects you or not, and if it does, how you are going to do the relevant accounting and VAT submissions.

What Sage is doing about it

At present, we believe only a very small number of Sage One customers (mostly small and micro businesses) will be affected but have published advice on how they can manage VAT MOSS using our cloud-based Sage One Accounts Extra software on our Online Help Centre.

Our 24hr Sage One Customer Support Team have also been fully briefed and trained on how to guide you through if you’re still unsure how to do it.

Recommended reading

Unfortunately, some of the recent media coverage and social media activity could be accused of being more confusing than helpful so in addition to following our advice, we recommend visiting the GOV.UK website for the latest guidance including the excellent:

HMRC Policy Paper: VAT rule change and the VAT Mini One Stop Shop – additional guidance (10th December 2014)

The flowchart HMRC have been sharing on Twitter (below) is also very easy to follow and a useful way of understanding who needs to do what.

VAT MOSS flowchart from HMRC

Click here for a slightly larger version.

Need further help?

1. If you’re already a Sage One Accounts or Sage One Accounts Extra customer, we’ll be providing you with further guidance soon.

2. If you’re not yet a Sage One customer and think you might be affected by the new legislation, sign up for a free 30 day trial of Sage One Accounts now at https://app.sageone.com/signup?product=accounts. You can also visit our online VAT returns page to understand how you can submit your VAT return using Sage One.

(If you decide to continue using it after the free 30 day trial, a subscription to Sage One Accounts is just £10 + VAT per month and ensures that you’re always up-to-date with the latest legislation. You also have the added reassurance of free 24hr telephone and email support from our award-winning Customer Support Team).

3. If you’re still confused by the new EU legislation and need extra help and advice, please post your questions in the comments box below so we can answer them for you and get a better understanding of what people are most worried about. Your questions and our answers will also serve as a useful reference for anyone else that wants to know more.