Just had this reply from Vince Cable. Well the reply if from Jonathan Heath. Dear Ms West, Thank you for your email of 20 November 2014 to Vince Cable. Your letter has been passed to HMRC as this Department is responsible for the administration of VAT and I have been asked to reply. You are concerned about the changes to the VAT place of supply rules that came into force in 2015. As you are aware, from 1 January 2015, intra-European (EU) supplies of digital services to non-business customers are taxed in the Member State in which the consumer is located. This change is important to the UK. It removes a distortion of competition which unfairly favours businesses that locate to a Member State with a lower rate of VAT than the UK. It therefore creates a level playing field for all UK businesses and helps protect UK revenue. UK consumers of these services will pay UK VAT, no matter where in the EU the supplier belongs. This change also affects UK businesses which supply non-business customers in other Member States, as local VAT is due on those sales from 1 January 2015. HMRC is keen to do everything we possibly can to support the smallest businesses, but the UK cannot unilaterally introduce a cross-border threshold. That would need a proposal from the EU Commission, and unanimous agreement from all Member States. Although the UK continues to make the case in Europe for some form of cross-border threshold, so that the smallest businesses would be outside the system altogether, other Member States (whose revenue would be affected) and the Commission do not yet support such an approach. The UK therefore continues to be a driving force behind other legislative and non-legislative measures to reduce the impacts. These include: Two legislative measures: 1. A Mini One Stop Shop (MOSS), allowing businesses to account for all the VAT due throughout the EU via a single registration in one Member State. Our UK MOSS has been open for some time. It gives UK businesses the option of registering in just the UK and accounting for VAT due in other Member States, using a single return and making a single payment to HMRC covering all the VAT due. 2. Making digital platform operators, for example Google Play, accountable for the VAT on digital services, such as apps, sold through their platforms. This means digital service platform providers are responsible for accounting for the VAT on supplies of digital services sold through their platform. It relieves digital services developers that only trade through such sites from the burden of administering this change. Small businesses only selling through a digital platform or marketplace will not have to register for VAT in other Member States, or consider the MOSS option. Two non-legislative measures: 1. Member States have also recently agreed a co-operation framework on audit and control by way of draft ‘best practice’ guidelines. This is firmly anchored in underlying EU law. It is a pragmatic and efficient approach to encourage Member States to coordinate activity, in order to minimise business (and tax administration) burdens. 2. An EU Web Portal to provide information about the relevant rules in all Member States, including rules on VAT rates and invoicing, available to all businesses across the EU, in a single place. This came into operation recently and is available at: ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#national_rules. HMRC is doing as much as it can to practically support UK businesses. We have provided guidance, including via channels such as Twitter, to ensure businesses understand all their options. We have also provided additional guidance on some key issues raised by smaller UK businesses, as it is clear that they are worried about how these rules will affect them. We hope the new guidance will go some way to allaying these fears. The additional guidance includes advice on how small businesses can register for VAT in the UK to be eligible for MOSS and still benefit from the UK’s VAT registration threshold for sales to UK consumers. This means that businesses under the current VAT registration threshold of £81,000 may register in respect of their cross border sales only. As a result, a business will not have to account for VAT on its supplies to UK customers. We have also confirmed that until 30 June 2015, UK micro-businesses that are below the current UK VAT registration threshold, and who register for MOSS may base their ‘customer location’ VAT taxation and accounting decisions on the country information provided to them by their payment service provider. This means they do not need to request further information from their customers. This will give micro-businesses additional time to adapt their websites to meet the new data collection requirements. HMRC have received assurances that the main payment service providers will supply businesses with the necessary information. The guidance for MOSS can be found here: https://gov.uk/register-and-use-the-vat-mini-one-stop-shop and the guidance relating to the evidence needed can be found here: https://gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers/vat-businesses-supplying-digital-services-to-private-consumers HMRC will also continue to provide support and engage with UK businesses over the coming weeks and if you have any further queries about the 1 January 2015 changes, you may wish to contact HMRC direct at: [email protected]. Yours sincerely, Jonathan Heath
Posted on: Wed, 07 Jan 2015 18:39:35 +0000
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