UK extends VAT MOSS concession for micro-businesses

The UK’s tax office, HMRC, has announced an indefinite extension of a compliance concession for micro-businesses operating under the new Mini One-Stop-Shop regime for EU VAT on digital services to consumers.

The 6-month MOSS customer ID simplification, granted in December 2014, excused micro-businesses - defined as being below the UK’s VAT registration threshold £82,000 per annum - from the detailed requirements for collecting EU customer information. This was required to determine and prove which country their customer consumed the e-service in, and therefore which country’s VAT rate to charge.

Instead of following customer location guidance issued by the European Commission and implemented into the EU VAT Directive, HMRC will permit micro-businesses to instead rely on information supplied by their payment service provider.

There have been less than 10,000 businesses registered under the new 2015 changes that compares to the European Commissions expectation for up to 1 million. This has been blamed on lack of awareness, but also the disproportionate compliance burden place on small business.  This has led to calls for an EU VAT digital services registration threshold to be introduced, similar to the distance selling VAT threshold on physical goods.  A plan is to be put forward by the European Commission in June 2015.