If you sell B2B, no UK VAT should be due on the sale. The sale will be outside the scope of UK VAT and the customer will have the responsibility to self-account for VAT in its own EU country under what is called the ‘reverse charge’. Ideally you should obtain and quote your customer’s EU VAT registration number on your sales invoice to demonstrate that the supply is to a business customer. EC Sales Lists will need to be filed as well as your usual VAT return declarations.
However, if you are selling to the general public or entities not in business in EU countries, VAT will need to be charged by you in the country where your customer belongs. This affects anyone providing services in the BTE sector – that’s Broadcasting, Telecommunications and E-commerce – where the customer is in another EU Member State and is not a business. The first issue therefore for a supplier is to determine whether the service supplied is one which falls within this new rule, introduced in January this year.
Supplies caught by this rule mean that a B2C supplier must either register for VAT in each country it supplies, no matter its turnover there, or use a simplification option. This simplification is called ‘MOSS’, the Mini One Stop Shop. The supplier has to apply for a MOSS registration and can then accesses a portal on HMRC’s VAT registration site, accounting for any sales to other Member States through this portal.
The plus side of MOSS is that it should make it easier to account for the VAT on such sales rather than having to register in what could be 27 other countries. The downside of the new rule is that it applies to ANY such qualifying services supplied to non-business customers, so charities, educational establishments and possible certain government departments for example could be regarded as B2C supplies and so give suppliers liability to apply the rules. Can your system determine whether your customer is in business?
One final point to make is that suppliers of some digital services such as apps might sell through an intermediary such as App Store or Google Play, rather than directly to the customer in another country. If that is the case, unless the intermediary makes it absolutely clear that the supplier is making the sale to the customer, the intermediary will be responsible for accounting for the appropriate VAT on the sale.
Michael O’Brien is a partner at accountancy firm Kreston Reeves looking after accounts, outsourcing, technology and international