Partner Article

Dealing with the 2015 VAT regulations

New regulations regarding how VAT is applied on digital products sold in the European Union became law in 2015. VAT is now chargeable from the country of purchase rather than where the supplier is based. So that UK businesses don’t have to register for VAT in each EU state where they have sold to consumers HMRC have set up a service where businesses can use the VAT Mini One Stop Shop (also known as VAT MOSS), which is an online service. However businesses must be registered for VAT.

Many small businesses are deeply concerned as the onus on evidence gathering is down to them. Some have opted for expensive systems to handle this which take a percentage of each sale they make and some businesses have even suspended sales to the EU whilst deciding the best way forward.

One option is to use WordPress plugins to hand the evidence gathering needed to justify the decision to select one country as the user’s country of supply and so the VAT rate used. Because a user must use the VAT rate of the country of supply, the plugin also helps by allowing the user to import rates for each country. There’s a video herewhich gives an idea of how this can be achieved.

Also, as part of the new regulations, no later than April 20th businesses will need to have submitted a MOSS return to the tax authority to document the VAT collected on sales to EU consumers. For UK businesses which sell to businesses (B2B) they will also need to complete EC Sales List return each quarter.

Once the first MOSS return has been uploaded, the tax authorities in any one of the EU member states may choose to audit returns. If they decide to request an audit businesses will need to provide details of sales to EU consumers in an ‘audit file’. Lead by the EC commission, the tax authorities have agreed a standard format for the audit file (SAF).

As the deadline approaches, it is imperative to ensure your business is aware of the regulations and has the documentation necessary for HMRC - don’t leave it too late!

This was posted in Bdaily's Members' News section by Lyquidity .