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bigduckontax, Accountant
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How does the new UK VAT Rules (MOSS) affect services provided

Resolved Question:

How does the new UK VAT Rules (MOSS) affect services provided to the UK from outside (USA -> UK) the EU if at all, The .GOV and HMRC documents are way to vague and confusing to those of us who havent had the fortune of a Harvard Education.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Are you an operational US organisation or an UK ditto? Furthermore is the organisation supplying digital services? This is the key to this anti-avoidance EU measure. Taxamo gives the following pithy summary:

'So, what changes in 2015? From January 1, 2015, the location of the end customer (non-taxable person) is all that matters, but this was also implied in the 2003 legislation. From 2015 onwards companies with B2C sales in the EU will have to prove where their end customer is. Only B2C supplies of digital services are affected, B2B transactions operate as normal.'

I do hope that I am being of some assistance. I would urge you to read the Taxamo essay, I think you will find it very informative as it summarises the position so neatly. It is available here:

https://www.taxamo.com/us-digital-companies-eu-vat/

Customer: replied 2 years ago.

B2B i am in the UK, a VAT registered business, basically its the rules regarding B2B and reverse charge

Basically

If i buy say a service (web hosting from a USA company) but use it from the UK, this company doesnt charge me tax, some show me a EU XXXX number, in my records am i supposed to account for reverse charge on these transactions, also the same for digital products bout from outside eu, i.e. downloadable software which is used (by us) in the UK

I have tried to read the various documents from HMRC and other sources, but the information is overwhelming and confusing at the same time.

Also i sell products to customers and ship them outside the EU, how do these fall under the VAT rules.

From what i can make out VAT MOSS, relates to me selling to EU member states, and having to charge vat to that customer based on their tax rate and keep several pieces of info to proof where that customer is and the rate of VAT charged to this customer, and report it via MOSS to HMRC

Expert:  bigduckontax replied 2 years ago.
The MOSS system automatically sorts the US organisation's sales, if it chooses to use it, into the relevant EU jurisdictions and deals with the VAT accordingly. You should receive a VAT invoice from the US company. However, under MOSS, I can see that falling through the cracks, but one could very properly assume that the purchase price included VAT input tax which may be reclaimed.
If you ship within the EU you use the reverse charge system where your inputs and outputs are simultaneously posted and you make a periodic EU Sales List Return to HMRC. When you sell outside the EU these are classed as exports and VAT is chargeable, but at a rate of 0%, what is defined as a zero rated supply.
MOSS does not affect you as an UK organisation when you make sales within the EU; it is a method for the EU to dip into US organisations' sales revenues. Your EU sales use the reverse charge method effectively making them zero rated.
Customer: replied 2 years ago.

So Basically i should record like this

Sales to EU (B2C) Charge VAT unless VAT Number Supplied

Sales to EU (B2B) Reverse Charge Applies

Purchases Outside EU (USA etc) Mark as "Out of Scope" for VAT

Sales Outside EU (USA etc) Mark as "Out of Scope" for VAT

Expert:  bigduckontax replied 2 years ago.
Your summary of EU sales procedure is correct.
For sales outside the EU charge VAT, but at a rate of 0%; they are a zero rated supply not 'out of scope' for VAT. An example of an 'out of scope' activity would be the receipt of a legacy or a donation to your organisation.
Purchases from outside the EU would have no VAT to recover as input tax. However if HMRC put them in bond and do not release until the Import Duty and VAT levied (usually for goods) has been paid then you would have some input tax to reclaim. For imports from the States under MOSS then you may assume that the sum paid for the service has been subject to input tax at the basic rate which can be recovered in the normal way through your quarterly VAT return.
With respect I would not use the term 'out of scope' for VAT at all. I have come across it but once when running a club registered for VAT when I inquired of HM Customs and Excise as it was then who told me that donations and legacies were outside the scope of the tax.
Customer: replied 2 years ago.

Could you be a bit more clearer on your term "Imports"

RC = Reverse Charge

Physical Products [RC or 0%] ?

Digital services such as dropbox.com (USA based consumed in UK) [RC or 0%] ?

digital products, such as software purchases downloaded and used in UK [RC or 0%] ?

I use the term "out of scope" from this explaination in the help pages of my accounting software, recently updated after january 2015

Outside the Scope of VAT

Some items are completely outside the scope of UK VAT. These often include sales or purchases made outside of the European Union. There are also some anomolies in there such as Congestion Zone charging, toll brides, tunnels and MOT testing services.

With the addition of the VAT MOSS rules (1st January 2015), it will also be necessary to levy VAT at the consumer's local VAT rate within their EU member state for certain digital services. This in effect would mean that the invoice is outside the scope of UK VAT.

Expert:  bigduckontax replied 2 years ago.
I only mentioned imports in respect of incoming goods being placed in bond. The items you import are not physical items so that process cannot take place.
If you buy in a service subject to MOSS it may be assumed to have suffered VAT input tax at UK rates and this can be reclaimed.
If you sell within the EU to an organisation registered elsewhere in the EU then the reverse charge procedure is used. If the customer cannot quote a VAT number of its equivalent then you charge VAT at the standard rate on your invoice.
If you sell to a customer outside the EU, and remember the Channel Islands and the Isle of Man are not members, then you still invoice for VAT, but at a rate of 0% as these services are exports.
The following statement is simply gibberish in an UK VAT context:
'Some items are completely outside the scope of UK VAT. These often include sales or purchases made outside of the European Union. There are also some anomolies in there such as Congestion Zone charging, toll brides, tunnels and MOT testing services.'
The 'anomalies' are actually items exempt from VAT, not 'outside the scope,' a very different matter as exempt supplies can reduce the proportion of input tax which can be reclaimed by the supplier.
Customer: replied 2 years ago.

Just to be clear on this point

If you buy in a service subject to MOSS it may be assumed to have suffered VAT input tax at UK rates and this can be reclaimed.

1) service subject to MOSS [ How to determine this then ]

2) If you buy in [ am i correct in this statement you mean from outside the EU ? ]

Expert:  bigduckontax replied 2 years ago.
Yes, MOSS is applicable to digital business selling into the UK. Digital businesses selling into the UK will be assumed to have VAT charged at the the rate applicable to the importing country. This should be quoted on the invoice. This VAT can, of course, be reclaimed as an input tax.
Customer: replied 2 years ago.

So going off our conversation that the following

Invoice from Dropbox.com (USA Supplier)

States £x.xx Total (Includes 20% Tax) and is reclaimable via reverse charge ?

What if the supplier doesnt state like above and the invoice state 0% tax ?

Expert:  bigduckontax replied 2 years ago.

It is reclaimable just like any other purchase if the tax is quoted. It is not a reverse charge item.

If the invoice states 0% then there is no input tax to reclaim. If the seller is silent on the subject that a VAT charge at 20% may be assumed and reclaimed. Remember than many organisations have been ignoring the effect of MOSS for over a decade.

Here is the summary from Happy Bootstrapper:

'Until now European businesses selling to digital goods and services to European consumers have charged VAT based on where their business is located. Now the VAT must be charged based on where the consumer of the service/goods is located.

Table for VAT changes 2015

The change was made because EU wants to get more money from transactions for American companies – or to force them to move more operations to EU to get VAT reductions.'

Customer: replied 2 years ago.

Confused no, what do you mean by "silent"

Also "It is reclaimable just like any other purchase if the tax is quoted. It is not a reverse charge item." i was of the understanding that this was only possible with another vaild VAT number or similar GTIN etc

Expert:  bigduckontax replied 2 years ago.
The reverse charge system is used when dealing with other EU located organisations which themselves are registered for VAT or its equivalent.
By silent I refer to an invoice where no VAT is mentioned. US firms have been ignoring these regulations for a decade and some will, I suspect, continue so to do.
Customer: replied 2 years ago.

Ok that clears up the USA end for me.

So i can presume VAT on a Invoice from USA Company, if there is no mention of TAX or VAT

And if i provide my VAT number and dont get charged VAT this is classed as Reverse Charge @ 20%

Also For EU VAT Member States Purchase the Reverse Charge is @ 20% (UK) and not the EU Countries Rate.

i.e. eBay has 15% LUX Tax/VAT

But i would record the VAT on the reverse charge @ 20% and not 15%

Expert:  bigduckontax replied 2 years ago.
Providing that the US company is complying with the EU's VAT rules through MOSS, yes.
Reverse charge only applies to transactions between EU located organisations where each exchanges VAT or equivalent VAT numbers when you make sales to them. which would effectively reduce your VAT from standard rate to nought.
If you were buying from an EU state with a lower rate of VAT then the seller would have the reverse charge situation to deal with at whatever rate was applicable to their own country.
Customer: replied 2 years ago.

From reading on the web you answer doesnt see to tally with other answers

In the example of a UK business spending £1000 via Google AdWords, it means:



  • You will not charged the Irish VAT of rate of 23% by Google.

  • On your VAT return, you will have to include £200 of VAT in box 1 (based on the standard UK rate being 20%).

  • You may then reclaim that £200 VAT by including it as input VAT in box 4 of the same VAT return

  • The £1000 net expense should be added to box 6 and box 7.

Customer: replied 2 years ago.

can i ask which country your expertise/qualification was gained ?

Expert:  bigduckontax replied 2 years ago.
Please clarify what you mean by 'a UK business spending,' is it buying a service or selling a service?
I am UK qualified, but I do hold an international qualification through my CGMA.
Customer: replied 2 years ago.
Buying a service
Expert:  bigduckontax replied 2 years ago.
If Google is aware of your VAT number then they will be operating reverse charge and no VAT reclaim appropriate. Otherwise, under the new rules they will charge VAT at the UK rate, 20% which can be reclaimed as input tax. It is the Irish organisation which operates the reverse charge if you are buying from them. You have nothing to do except to record an EU purchase through the appropriate box on the VAT 100.
Depending upon which method is adopted by the Irish organisation then you will either have no input tax to reclaim, if reverse charge applies, otherwise 20%. Remember this rule applies only to digital services.
Customer: replied 2 years ago.

Reverse Charge Applies to B2B, from what i read the changes VAT MOSS brought in are relevant to B2C transactions of digital services and not B2B

even the image you provided with the table states this, please see image above

Expert:  bigduckontax replied 2 years ago.
I have told you the situation. If the Irish organisation elect to use the reverse charge procedure, it is their perogative, then your UK accounts have no VAT to recover as input tax. If they elect not to reverse charge then your business will have 20% of input tax to claim back.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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