New VAT rules for the supply of digital services

Published on 10 January 2019

Following HMRC’s policy paper: VAT Changes to the Supply of digital services 2019, new rules are expected in relation to the rules for businesses making sales of digital services to consumers across the EU.

Why does it matter?

The changes are relevant to users, or prospective users, of the UK VAT Mini One Stop Shop (MOSS) and non-UK businesses who sell digital services to the UK and EU customers. The draft legislation seeks to make two changes:

  • the introduction of a €10,000 threshold for total supplies to the EU in a year of sales of digital services which will mean that where relevant sales across the EU in a year fall below the threshold, businesses will only be subject to the VAT rules of their home country. Where the total taxable turnover is below the UK VAT registration threshold, the business will be able to de-register for VAT, and

  • the opening of the MOSS scheme to non-EU businesses registered for VAT for other purposes, to account for VAT on sales of digital services to consumers in EU member states.

What action should you take?

Companies should check whether they will be subject to the changes identified in HMRC’s policy paper and non-EU businesses will need to be aware of potential changes to their VAT returns upon entering into the MOSS scheme.

Taxpayers that do not exceed this new calendar year threshold need not register for the MOSS scheme.
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