VAT MOSS means VAT Mini One Stop Shop, the EU’s new digital VAT rules introduced in new year 2015. It says VAT has to be charged on digitally-delivered services in the country the customer is based, not the country the business is located.

Why was VAT MOSS introduced?

VAT MOSS was brought on board to stop big business with HQs in countries with a lower VAT rate from making unfair profits. But like so many of HMRC’s ill-thought-through initiatives it fails in the real world, at least where small business is concerned. In fact it looks like they forgot to factor in small businesses altogether. As a result hundreds of British microbusinesses selling digital products like e-books or online tuition, were suddenly faced with a total financial nightmare.

Before VAT MOSS small business like this were protected by the UK’s £82,000 VAT threshold. The next minute they were liable for VAT on every sale they made in the EU. It’s a ridiculous situation and may well cost the beleaguered taxpayer a fortune to sort out.

Sole traders left in limbo

The sole traders affected by the new law have been left with limited choices:

  • Spend ages registering for VAT MOSS in order to pay a few pence in VAT for the occasional EU order – typically, it is never simple to set these things up
  • Take the risk and don’t bother registering
  • Refuse sales from abroad, AKA geo-blocking.

The nightmare is far from over

The EC has made it very clear they’re perfectly happy to support a sensible threshold to exempt the smallest businesses. But all the same, the nightmare is far from over.

The threshold can’t be introduced for at least two years, which is the minimum notice the tax authorities need to give to make such a change and crazy in itself. With luck it could come in for 2018 but 2020 is just as likely. Which potentially leaves microbusinesses in the poop for the foreseeable future through no fault of their own. It’s HMRC’s responsibility for forgetting to consider them in the first place.

But there’s more. Some EU countries might accept a low threshold of 10 – 20 thousand Euros. Many EU nations don’t want a threshold at all – because the EU is more open to fraud than the UK, the authorities prefer to charge VAT on everything. But Britain is demanding a £100,000 limit. In fact the UK stands more or less alone in its VAT MOSS rebellion, with business owners stuck in the middle of the mess.

When will it end?

The wheels of HMRC grind slowly. ‘Proposals’ to resolve the issue are due to be formalised by the end of 2015 but until then tiny businesses remain in limbo and the issue is undermining the entire digital single market. If that’s you, get in touch and we’ll help you sort the mess out.