If a business sells digital content such as eBooks, downloads and other non-physical resources, VAT will be payable to the country where the service was bought. Whereas before VAT was charged in the country of the supplier. For example, if an eBook is sold to a customer in Spain and one in Italy, the business will have to pay VAT at the rate for each country, and to each country.
A second option was that small business owners could register for a VAT “Mini One Stop Shop” (VAT MOSS) by registering for VAT in the UK, which would funnel the tax payments automatically but make the seller liable for VAT domestically, even if they fall below the threshold. For the comprehensive VAT MOSS guide, click here.
What are the recent policy updates?
On Tuesday, 10th December, HMRC tweaked the VAT MOSS rule. It is still compulsory for small business owners to register for VAT in the UK to use MOSS; however, they will no longer be forced to charge UK VAT on their domestic sales. This is good news for small businesses who distribute digital content. Richard Asquith, vice president of global tax at tax management firm Avalara commented “There will be no need to charge UK VAT on the UK sales, which was the major threat.”
To discuss this further and to find out how it affects you, contact our VAT expert David Fiddy at firstname.lastname@example.org