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VAT MOSS – How it affects you and your business

If it wasn’t for a chance post being shared on my facebook feed late last month I’d be completely non the wiser about this new EU legislation and if you haven’t seen the phrase VAT MOSS doing the rounds on social media, then chances are that you too are completely oblivious to this new EU legislation that’s going to hit thousands of small businesses across the UK and the EU.

When I first saw the article on this new EU regulation a wave of horror came over me, as a business owner who’s main income comes from selling and publishing online, I wondered how on earth I’d continue to do business. Let’s face it, most small businesses barely earn enough to register for VAT within the UK, so the idea of now having to register to pay VAT within the EU was mortifying.

In a nutshell, VAT MOSS is a new EU legislation which comes into force on January 1st affecting the sale of digital goods within the EU. If your an independent publisher selling e-books or magazines digitally, or a crafter selling pdf patterns, then you’ll need to register to pay VAT within the EU from the 1st January. To some, it may not seem like much, sure it’s only digital goods, but the legislation covers much more than you’d initially imagine, so much so, that it may even cause you to completely re-think your business plan.

What exactly is covered under the new legislation is a bit of a mine field; you have to read very closely to see in between the lines to find exactly what’s covered to ensure that your business is up to scratch ready for it’s launch, and even then it’s still not 100% clear if it applies to you and your business.

If you sell images, be it stock photos, or copies of photos for fans, text; such as e-books and magazines, music; no more selling mp3’s for bands and artists themselves, digital films and games, website supply and hosting services, supplies of software and updates, advertising space on a website; although for now this seems to only apply to b2c (business to consumer) ads and not b2b (business to business) ads, distance maintenance of programmes and equipment. Basically, as long as you supply the goods digitally, then you’ll have to register to pay VAT in the future.

So what does this new legislation entail? For small businesses, you’ll have to pay VAT in the EU countries that you’re selling to, so if a buyer in Germany orders an e-book from you, you’ll have to pay VAT at the rate set in Germany on that sale. Thankfully, you won’t have to chase down the German VAT office, HMRC have set up a one stop VAT shop where they’ll do that for you, provided that you keep your records up to date to file with them for all EU sales. But what you will have to do is submit quarterly VAT reports, keep customer records and data on file for 10 years, complete audits, and of course, pay those all important VAT bills for any EU sales.

Lets face it, for small businesses it’s a bit of a headache, there’s still very little clarity of what does and doesn’t constitute a digital sale and very little regard for the small budgets and cost of time to the thousands, even millions, of EU businesses that will be hit by this new legislation.

It doesn’t make for light reading, but you can find further details on VAT MOSS at the HMRC website:

https://www.gov.uk/government/publications/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop

https://www.gov.uk/register-and-use-the-vat-mini-one-stop-shop

As for the future, who knows what will happen with VAT MOSS, but as a small retail business owner I’ll certainly be keeping a close eye on the proposed extension to cover physical goods sold within the EU as soon as 2016. It’s a hard time to be a small business owner.

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