VAT MOSS - What is VAT MOSS?
VAT MOSS, or VAT Mini One Stop Shop, is a scheme to standardise the method of paying VAT as a business who sells digital services to consumers in other EU member states.
The UK and the US have a significant trade agreement. If your business imports or exports goods and services between these countries, the tax system can be rather confusing. Read more on our blog: ‘VAT between the UK and the US’.
To use this scheme, you must be either a UK business who supplies digital services to other EU member states or your business is located outside the UK and EU but you sell digital services to consumers in the UK or EU.
The VAT charged is based on the ‘place of supply’, and varies based on where your business is based, where the consumer is based, and whether you are VAT registered in the UK.
How does the VAT MOSS scheme work?
The VAT MOSS scheme is a way of calculating VAT when you sell digital services to consumers (B2C). It makes the process of selling to customers in other countries simpler as your business will not need to register for VAT in every country.
The services included in the scheme include:
- Website hosting
- Software & apps
- Online teaching
- Online consulting
- Radio broadcasting
Most services that are provided to consumers (not businesses) and are provided in a digital format are eligible for the scheme.
VAT MOSS place of supply
The VAT rate charged on these sales is determined by the place of supply.
If your business is based in the UK and you sell digital services to other EU countries, the VAT is charged at the rate of the consumer’s country (place of supply).
If your business is located outside the UK and EU, but you sell digital services to consumers in the UK and/or EU, the place of supply will be the country in which the consumer is based.
In both cases, you will charge VAT at the standard rate of the consumer’s country.
You can look VAT rates for different EU countries on the EU website.
The 2 types of VAT MOSS scheme
There are 2 types of VAT MOSS scheme, Union VAT MOSS, and Non-Union VAT MOSS dependant on where your business is based.
For Union VAT MOSS, your business must be VAT registered in the UK and either be based in the UK or be a non-EU business with a UK based branch or establishment. Your business must also sell digital services to consumers where an EU member state is the place of supply.
For Non-Union VAT MOSS, your business must be based outside of the UK and EU and have no branch or establishment in the UK or EU. Your business also must sell digital services to UK or EU consumers.
How to register for the VAT MOSS Scheme
Registering for the scheme depends on if you are registering for Union or Non-Union VAT MOSS. In both cases, you must register yourself, it cannot be done by an agent.
Register for Union VAT MOSS
To register for Union VAT MOSS, you will need to first be registered for VAT in the UK. If you are not already registered, you can find more information on our article: ‘VAT registration’.
If you are already registered, you can sign on to HMRC with your normal credentials. There will be an option to register for VAT MOSS and you will need to fill out a form stating any fixed establishments or branches you have in EU member states.
If you are not VAT registered and below the VAT threshold, you will need to voluntarily register for VAT in order to use the MOSS scheme. If your business only registered for VAT to use the scheme, you will need to submit a ‘Zero VAT Return’.
Register for Non-Union VAT MOSS
To register for Non-Union VAT MOSS, you do not need to register for UK VAT. Rather, you will need to create a Government Gateway ID and password through the HMRC website. Once created, you can log in to your account and quickly submit the application for the VAT MOSS scheme.
Deadline for registering for VAT MOSS
In both types of VAT MOSS scheme, there is a deadline to which you can register for the scheme. If you do not meet this deadline your business may incur fees.
The deadline to register is the 10th day of the month following your first sale that meets the requirements of the scheme.
For instance, if you sell a digital service on March 17th to another EU member state consumer, and the sale falls under the scheme, you will need to register before April 10th.
MOSS VAT return
When you register for the scheme, you will also automatically be signed up for the ‘Online VAT MOSS Return Service’.
This means that you will need to submit quarterly returns to HMRC through your HMRC account. The deadlines for the returns are:
- April 20th: for Q1 ending on March 31st
- July 20th: for Q2 ending on June 30th
- October 20th: for Q3 ending on September 30th
- January 20th: for Q4 ending on December 31st
Under the Union VAT MOSS scheme, this return will only need to include digital services sales to EU consumers, it should not contain UK sales. You will need to submit a standard VAT report for UK sales (if above the threshold), or a Zero VAT return (if below the threshold).
Under the Non-Union VAT MOSS scheme, you will need to submit a Non-Union VAT MOSS Return for qualifying sales through HMRC Online.
Reclaiming VAT on the MOSS scheme
You can reclaim VAT on expenses related to VAT MOSS sales, however, this cannot be done on the VAT MOSS return.
If you are UK VAT registered, and charge VAT on standard sales, you can submit these expenses on your standard VAT return.
If you registered for UK VAT solely for the purpose of the VAT MOSS scheme, and are under the VAT threshold, you will submit a standard UK VAT return rather than a Zero Return.
How to deregister from the VAT MOSS scheme
VAT MOSS is an optional scheme in which you can leave if you no longer wish to use it.
To deregister, simply log in to your HMRC account, navigate to the ‘VAT MOSS’ section, select ‘Change registration details’, and choose to deregister.
Bear in mind that the scheme runs on a quarterly basis, so you should try to deregister a few weeks prior to the end of the quarter.
If you require further information regarding the VAT MOSS scheme, I would suggest going directly to the UK Government website.