As you may be aware, the UK left the European Union on 31st January 2020 to enter a transition period during which, EU VAT rules continue to apply to and in the UK until 31st December 2020.
From 1st January 2021, the UK will have left the EU Single Market and Customs Union, and therefore, lost access to the EU VAT MOSS scheme.
The VAT MOSS is a scheme available across the EU for traders to report their cross-border B2C supplies of digital services, which have to be taxed where customers are based as soon as your cross-border turnover crosses EUR10,000. Joining the VAT MOSS scheme allows businesses to register in a single member state instead of having to register for VAT in every member state where consumers are based.
How does it work?
Once a seller is registered on the VAT MOSS, a single MOSS return needs to be submitted to the member state of identification (where the seller is registered and identified for MOSS) along with the VAT due on all cross-border B2C digital supplies. Once the return and payment have been submitted, the Member state of identification will split the VAT amounts to other member states of consumption (where the customers are based) in accordance with the data from the VAT return.
Who can use the VAT MOSS?
The VAT MOSS can be used by EU and non-EU sellers. However, as a non-EU business you would need to register on the ‘non-Union’ MOSS, specifically designed for overseas sellers.
Indeed, EU and non-EU sellers don’t use the same MOSS scheme and the process to join the scheme is slightly different. With the end of the transition period coming up, the Union scheme will no longer be available in Great Britain – because the UK will have left the Single Market- and as such, businesses trading digital services should consider reviewing their position and switch scheme if they want to continue benefiting from a relief of administrative burden that the MOSS offers.
You are a UK business supplying digital services to EU consumers
If you are a UK seller, supplying digital services -such as digital patterns, software, music streaming or online teaching-, consider switching to and making use of the non-Union Scheme, for businesses not based in the EU.
For supplies of digital services made on or after 1 January 2021, UK sellers will not be able to use the UK’s VAT MOSS to report and remit and VAT due on these EU supplies.
As advised by the government, the final VAT MOSS return will be for the period ending 31 December 2020. The deadline to submit this return will be 20 January 2021.
After 1 January 2021, you will still be able to access the MOSS scheme to:
- Make corrections to your returns up until 11pm on 20 January 2022
- Submit any updates to your registration details until 31 December 2024
- Access your previous MOSS returns
Any sale of digital services made on or after 1 January 2021 will need to be reported by either joining the non-Union MOSS in an EU member state of your choice or registering for VAT in each EU member state where you supply B2C digital services.
Please note that the deadline to register on the VAT MOSS is the 10th of the month following your first sale to an EU customer.
This means that if you make a sale of a digital pattern to a French consumer on 22 January 2021, you will have to register for the non-Union MOSS by 10 February 2021.
Alternatively, you will need to VAT register in each EU country where you make sales of digital services to private individuals.
You supply digital services to GB consumers from outside of the UK
Overseas traders supplying digital services to GB consumers on and after 1st January 2021 will no longer be able to report these supplies on the VAT MOSS. Instead, overseas businesses continuing to sale online services in the UK will need to register for VAT in the UK from the first sale to report and pay for the VAT due on these B2C digital supplies.