VAT MOSS stands for Mini One Stop Shop and affects digital services business providing services to consumers (B2C). VAT MOSS means that when a business provides digital services to consumers, that business is responsible for charging VAT on the sale at the VAT rate than the buyer lives in. So once you have established that your digital business falls under the VAT MOSS rules, the next step is to get registered and start reporting to HMRC.
Your VAT MOSS Registration Options
Under VAT MOSS there are actually two ways to register your business and start collecting taxes:
- Register for VAT in each of the countries you supply digital services to and submit individual VAT returns and payments to each, in accordance with each countries rules;
- Register with HMRC for VAT MOSS, where you are required to submit a single quarterly VAT return and payment. HMRC will then distribute it to each the countries you have sold your services to.
Generally speaking option number two is the simpler way to manage taxes in small and micro businesses and it is this one I will go into in this blog.
Registration Deadline for VAT MOSS
You are required to register for VAT MOSS by the 10th day of the month after your first digital service sale.
For example, if your first sale of digital services is on 8 February 2018, you must register by 10 March 2017. Your VAT MOSS registration will be backdated to 8 January, the date of your first sale.
How to Register for VAT MOSS
Registering for VAT MOSS is fairly straightforward and you can do this online yourself.
If you are not already registered for UK VAT, then you will need to do this first. You can do this online HERE. You’ll need to create an HMRC business online account, if you don’t already have one and there is more information on this in my earlier blog ‘How to Register for VAT Online‘.
Once your VAT Registration is completed head back into your HMRC business online account dashboard to begin your VAT MOSS registration process.
Choose the option to find a tax, duty or scheme:
Select the option to add ‘Another VAT Service’
Finally choose the following options – to add MOSS and that you are not already registered.
You will then enter the formal registration procedure for which you need to have the following information at the ready:
VAT MOSS Reporting Requirements
Once registered you are required to submit quarterly VAT MOSS returns via your HMRC business account by the following dates:
- 20 April – for first quarter ending 31 March
- 20 July – for second quarter ending 30 June
- 20 October – for third quarter ending 30 September
- 20 January – for fourth quarter ending 31 December
Submit Your UK VAT Return
If your business is below the UK VAT Registration Limit (currently £85,000) then you must remember to submit a nil VAT return within the VAT section of your online account. Don’t forget because failure to do this may result in HMRC chasing you and issuing penalty notices.
Claiming Back Input Tax on Purchases
When you are registered for VAT MOSS there are certain circumstances which governs whether you can claim back VAT on your purchases and how much:
You are Below the UK VAT Registration Threshold of £85,000
You cannot claim back input VAT on your UK sales however you can make a claim on your VAT MOSS for a portion of your input VAT. This is normally based on an apportionment of your sales in the UK and EU.
Say for for example 40% of your turnover relates to EU sales, then you would be allowed to claim back 40% of your UK input tax and you do this on your UK VAT return, instead of submitting it as a nil return.
You are Above the UK VAT Registration Threshold of £85,000
Then you will need to charge VAT on your UK sales and put this on the UK VAT return, as well as declaring your EU Sales to consumers via VAT MOSS. In this case you can claim back 100% of your input tax on your UK VAT return.
Record Keeping for VAT MOSS
As part of your quarterly reporting you will need to summarise the amount of sales you have made to each EU country and the % VAT applicable in that state. In order for you to work out this information and as part of your general record keeping, you will need the following
- the member state where you made the sales – known as the member state of consumption
- the date you supplied a service
- the taxable amount, including the currency used
- any increase or decrease of the taxable amount
- the VAT rate you applied
- the amount of VAT due and the currency used
- payments your business received – the dates and amounts
- any payments on account your business received for services before you supplied them
- the information shown on any invoices you issued
- your customers names – where known
- the information you used to work out where a customer is based
You must keep this information for 10 years and be able to send it to HMRC electronically if asked. Given the level of detailed involved you will need to review your online payment system and decide whether you need an additional plugin to collect the information you need. Woocommerce offer a free plugin called Taxamo, that tweaks your online payment system however other plugins do exist in the wordpress marketplace.