ICAEW Rep 118/18 VAT Mini One Stop Shop changes – draft legislation

Released 8 October 2018

The Institute of Chartered Accountants in England and Wales (ICAEW) has published comments on draft legislation for VAT supplies of electronic, telecommunication and broadcasting services.

On 11 September 2018, HMRC published two draft statutory instruments for consultation. The draft regulations make two changes to the rules for businesses making sales of digital services to consumers across the EU:

(1)To introduce a (sterling equivalent) €10,000 threshold for total supplies to the EU in a year of sales of digital services;

(2)To allow non-EU businesses, which are registered for VAT for other purposes, to use the Mini One Stop Shop (MOSS) scheme to account for VAT on sales of digital services to consumers in EU member states.

The ICAEW is concerned about the practical effect of the changes, particularly, that the draft legislation is designed to implement new EU requirements from 1 January 2019. If a transitional period is not agreed as part of Brexit negotiations, this means the changes may only apply in the UK until 29 March 2019. Potentially, therefore, a business supplying less than €10,000 of digital services to consumers in other EU countries may need to follow three different sets of rules in close succession: existing MOSS rules until 31 December 2018; revised place of supply rules without MOSS from 1 January to 29 March 2019 (ie, charging UK VAT unless the option is exercised to pay VAT where the customer is located) and then the non-Union MOSS rules from 30 March 2019, implying a registration in an EU member state. The ICAEW recommends that, if possible, this double change within such a short period of time should be avoided.

View the ICAEW Rep 118/18.

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