HMRC have recently changed the way tax is handled for businesses supplying digital services to consumers in the EU.
From January 1st 2015, VAT on digital services is paid in the consumer’s country, not the supplier’s country, and is charged at the rate that applies in the consumer’s country.
For a micro-business selling ebooks online for instance, this would involve potentially registering for sales tax in every EU country you supply to. So you don’t have to do this HMRC have introduced VAT Mini One Stop Shop (MOSS). Once you’re registered for MOSS, you can account for the VAT due on sales in other EU countries by submitting a single quarterly return and payment to HMRC. HMRC will then send an electronic copy of the appropriate part of your return, and any payment, to each relevant country’s tax authority. For further information you can take a look at the HMRC guidance on MOSS.
We can support you with any VAT MOSS liabilities through FreeAgent.
The first thing to do is head over to the Settings > VAT Registration page and confirm you’ll be making VAT MOSS sales.
When you create an invoice or explain a bank transaction as Sales, you can now flag this as being under VAT MOSS, and include the place of supply. This will let you apply the appropriate sales tax for the country, and ensure the sale doesn’t appear on your normal VAT return (if you have one).
Finally, you can now view a list of all VAT MOSS transactions on the Show Transactions page under a separate category, which should make filing your MOSS return easier.