Registered in England Registered Number: 04744238 Registered Address: 62 The Street, Ashtead, Surrey, KT21 1AT
Registered with the Chartered Institute of Taxation as a firm of Chartered Tax Advisers
Director: David John Beckman MA (Cantab) ACA CTA FPC VAT No: 812 3468 46
VAT Rules for supplies of Broadcasting, Telecommunications and Electronic Provided Services
From 1 January 2015, there are major changes to the VAT treatment of Broadcasting, Telecommunications and Electronically Provided Services. These three types of services are abbreviated here as B T E Services.
1. Who is Affected?
a) UK businesses supplying electronically supplied services;
b) Non-EU businesses supplying electronically supplied services to EU customers; and
c) UK businesses and non-business organisations receiving electronically supplied services from outside the UK.
Business to Business Supplies (B2B) and Business to Consumer Supplies (B2C)
‘B2B’ supplies are by a business to another business. The new rules do not affect B2B supplies in any way – there is no change to the VAT treatment. An EU customer should provide its VAT registration number to a supplier in another member state, so that the supplier need not charge VAT. The customer charges itself VAT under the
‘reverse charge’. This ensures that VAT is accounted for at the rate applying in the customer’s place of establishment.
However, the changes to B T E services may well affect ‘B2C’supplies, that is supplies made by a business to a non-business consumer. Where a customer does not provide a VAT registration number and there is nothing that leads the supplier to believe that the customer is in business, the supply can normally be regarded as being made to a ‘final consumer’, i.e. it is a B2C supply.
2. What are B T E services
You will need to consider the definitions of B T E services to see if your business is affected by these changes. Most clients we deal with are likely to be supplying e- services, the third category below, rather than Broadcasting or Telecommunications.
a) Broadcasting
‘Broadcasting supplies’ are services of broadcasting audio and video, regardless of the means used (landline, radio transmission, satellite transmission, etc.). This includes satellite and cable TV. Broadcasting excludes the transmission of other person’s material by electronic means, but this could constitute e-services.
b) Telecommunications
‘Telecommunications supplies’ relate to the transmission, emission or reception of signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including:
- the related transfer or assignment of the right to use capacity for such transmission, emission or reception; and
- the provision of access to global information networks.
This includes the provision of telephone services, switching of completion of other supplier’s calls, supply of lines and networks, telex, fax, e-mail, internet access, satellite transmissions and other similar services. It excludes the processing of data, broadcasting or the supply of information.
c) Electronically Provided Services (E-Services)
‘Electronic services’ include a service delivered over the internet that heavily depends on information technology and requires minimal human input for its execution. This includes web hosting, distance maintenance of programs, supplies of software and updating software (e.g. selling anti-virus software), supplies of images, text and information, supplies of music, film, games and distance teaching (VATA 1994, Sch. 4A, para. 9(3)). The HMRC Place of Supply – Services manual states at VATPOSS 13550 states that e-services include:
(i) the supply of digitised products generally, including software and changes to or upgrades of software;
(ii) services providing or supporting a business or personal presence on an electronic network, such as a website or a web page;
(iii) services automatically generated from a computer via the Internet or an electronic network, in response to specific data input by the recipient;
(iv) the transfer for consideration of the right to put goods or services up for sale on an Internet site operating as an online market, on which potential buyers make their bids by an automated procedure and on which the parties are notified of a sale by electronic mail automatically generated from a computer; and
(v) internet service packages (ISP) of information in which the
telecommunications component forms an ancillary and subordinate part, i.e. packages going beyond mere internet access and including other elements such as:
- content pages giving access to news, weather or travel reports;
- playgrounds;
- website hosting; and - access to online debates.
HMRC has produced a Guide to Interpretation as to what exactly constitutes e- services. If you want to look at HMRC’s guidance further, you can click the link below:
http://webarchive.nationalarchives.gov.uk/20110202144320/http:/customs.hmrc.gov.u k/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pa geLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=
HMCE_CL_000907
https://www.gov.uk/government/publications/revenue-and-customs-brief-46-2014- vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance/revenue-and- customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional- guidance
3. What are the changes?
Prior to 1 January 2015, the sale of B T E services to non-business customers are subject to VAT rates and rules as governed by the country in which the supplier is based. If your business is based in the UK, you would be liable to register for VAT if supplies to UK individuals/consumers exceeded the VAT registration limit (currently
£81,000). Once VAT registered, you would need to add VAT at the current UK VAT rate of 20%.
From January 2015, the sale of B T E services to non-business customers within the EU will be taxed in the consumer’s country rather than that of the supplier. This means:
- You will need to be able to identify the country in which the individual consumer to whom you sell is based;
- You will need to consider the VAT registration limits in that country in which individual consumers to whom you sell are based. Some EU countries require VAT registration for any quantity of sales within their country. Affected UK businesses may well need to register for VAT in each EU member state in which they supply such services;
- You will need to charge that consumer VAT at the rate prevailing in that EU country. The sale of B T E services to a consumer in say France will be subject to VAT of 20% in France and will be outside the scope of UK VAT.
- Rather than registering for VAT in each EU country where consumers are based and rather than completing VAT returns in each of these EU
jurisdictions, businesses can instead register for the Mini One Stop Shop (MOSS) system. This will enable an affected business to submit one quarterly
return and payment to HMRC here in the UK to account for the overseas VAT charged to its customers in all other EU member states.
Sales of B T E services to consumers based outside the EC continue to remain outside the scope of UK or EU VAT.
4. Why have the changes been introduced?
The main purpose of the changes is to stop B T E suppliers basing themselves in countries with low VAT rates, such as Luxembourg at 15% and gaining an unfair trading advantage compared with a domestic business in, for example, UK or Sweden which charge 20% and 25% VAT respectively on its B2C sales to EU customers.
5. How do you account for VAT under the Mini One-Stop Shop (MOSS)?
As outlined above, the easiest way for a business to pay the overseas VAT after 1 January will be through the MOSS registration. This avoids the need to register in each EU country in which you have a consumer customer and pay over the relevant VAT to each EU country.
It is possible to register for MOSS from October 2014 despite the system not operating until January 2015. We as agents cannot register your business for MOSS (for security/possible fraud reasons). You will need to do this yourself. We understand you can register online through the Government Gateway.
Once registered for MOSS, we can however act as your agent and complete and submit the quarterly MOSS returns on your behalf. Please contact us if you would like us to do this and we can provide you with our fixed fee.
There is a problem obtaining a MOSS registration if you are a UK business currently not VAT registered as your sales are below £81,000. This is because only VAT registered businesses can apply and obtain a MOSS registration. It may be possible to split your business into two, one for UK business and one for EU business. If you are in this position, contact us immediately for advice.
MOSS returns must be submitted online for each calendar quarter (not based on your existing VAT Return quarters). MOSS returns must be submitted within 20 days of the MOSS calendar quarter end (rather than within 1 month and 7 days as with normal VAT Returns). Thus you/we have less time to submit MOSS returns.
The (EU) Union MOSS VAT number will be the same as the local VAT number, but the Union MOSS VAT return will be different to the standard VAT return.
The EU MOSS scheme does not operate a ‘de minimis’ reporting threshold. This means that all sales of B T E services to consumers must be reported on MOSS returns, however small the value of the sale.
If you are an EU business, you may register and use the Union VAT MOSS online service in the Member State where you have your business establishment (usually the
principal place of business or head office). Using the VAT MOSS online service means you can submit a single calendar quarterly VAT MOSS return and payment covering all your EU digital service supplies. For example, if you register for the VAT MOSS online service in the UK, you will be able to account for the VAT due on your B2C digital service sales in any other Member States where you do not have an establishment by submitting a single VAT MOSS return and any related payment to HM Revenue & Customs (HMRC). HMRC will send an electronic copy of the appropriate part of your VAT MOSS return and the related VAT payment to each relevant Member State's tax authority on your business’ behalf. The VAT rate used will be that of each Member State of Consumption at the time the service was supplied.
If you are a non-EU business making B2C digital service supplies to EU customers, and you have a fixed establishment in the EU, you will be able to register and to use the 'Union' VAT MOSS online service. You can choose a Member State in which you have a fixed establishment to register. Non-EU businesses without an establishment in the EU can use the non-Union MOSS to account for VAT on their supplies. They can choose any member state in which to register and account for VAT using the non- Union MOSS.
It is not possible to recover VAT input tax under the MOSS scheme. For a VAT registered business, input tax recovery will either involve the local VAT registration or the submission of an electronic cross-border VAT refund claim.
Is the MOSS scheme only available on an invoice basis and not a cash basis? Rules relating to the tax point are those laid down in each Member State of consumption - however, the rules will mostly be 'invoice based'. Detailed information on national rules are now on the EU MOSS Web Portal (with effect from October 2014).
6. What other practical issues do I need to consider?
a) EC Sales Lists
Only the supply of B2B B T E services needs to be reported on the EC Sales List.
These need to be completed and submitted for calendar quarters. Sales of B2C B T E services do not need to be reported on EC Sales Lists.
b) How do you identify the Location of Customers?
When providing digital services in the circumstances below, you can presume that the location of the consumer, and therefore the place of taxation, is as follows:
if the service is provided through a telephone box, a telephone kiosk, a wi-fi hot spot, an internet café, a restaurant or a hotel lobby, the consumer location will be the place where the services are provided
if the service is supplied on board transport travelling between different countries in the EU (for example, by boat or train), the consumer location will be the place of departure for the journey
if the service is supplied through an individual consumer’s telephone landline, the consumer location will be the place where the landline is located
if the service is supplied through a mobile phone, the consumer location will be the country code of the SIM card
if a broadcasting service is supplied through a decoder, the consumer location will be the postal address where the decoder is sent or installed
To keep the administrative burden on businesses to a minimum, you can apply the above consumer location guidelines without needing to collect and keep any supporting evidence. If you think that the above bullets do not properly determine where the consumer is located, you can select the correct location.
To support your decision, you will need to obtain and keep two pieces of non- contradictory commercial evidence (for example, evidence of the consumer's billing address, their bank details, their internet protocol (IP) address) to support your view.
These VAT changes may well mean you have to change your sales procedures, in particular, identifying whether someone buying from you is business or a consumer and identifying in which country that person is based. The compliance procedures if you sell B T E services are also about to get a whole lot harder, but we can help you through these.
62 The Street Ashtead Surrey KT21 1AT
Tel: 01737 844322 Fax: 01737 844162 Email: david@dbeckman.com
This fact sheet is for information only. It provides an overview of the regulations currently in force and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person or refraining from action as a result of this material can be accepted by the authors or the firm.
