What is VAT MOSS?
Definition of VAT MOSS
VAT MOSS is short for VAT Mini One Stop Shop.
If your business sells certain digital services to consumers in the wider EU, from 1st January 2015 you have to charge them local VAT based on where they used the service.
Instead of having to register for VAT with all the different countries in the EU where you may have customers, you can register with HMRC in the UK to use their “Mini One Stop Shop” and report and pay the VAT you charge under these rules to HMRC instead.
Please note, you have to charge this local VAT even if you are not registered for UK VAT!
Sales to businesses, and sales of physical goods, are not affected by these new rules.
Changes to VAT MOSS from 1st January 2019
If you sold less than £8,818 worth of digital services to consumers in the wider EU in 2018, you don’t expect to sell more than that in 2019, and you don’t have a base in the wider EU, then you’ll no longer need to charge local VAT - you can charge UK VAT instead.
Or, if your VATable sales are less than £85,000 a year, you can de-register for VAT altogether and not charge your customers any VAT.
HMRC have more guidance on this here.
Example of VAT MOSS:
Jackie sells .pdf knitting patterns online. She has customers across the world and her sales are £10,000 a year.
Maria buys one of Jackie’s knitting patterns in Spain. Jackie must charge Maria Spanish VAT on that sale, at the Spanish rate of 21%.
Frequently Asked Questions
This sounds really complicated! Why was it introduced?
Historically, businesses charged VAT on sales of services to consumers at the rate in the seller’s country. This enabled certain larger businesses to save money by locating themselves in countries with low rates of VAT, such as Luxembourg. The aim of the new rules was to level the playing field here - but unfortunately the effects on micro-businesses were not considered in detail!
Got questions? Ask Emily!
FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.