VAT MOSS, VAT flat rate scheme, Trust tax returns

This issue highlighted two VAT issues which affect small businesses; the ridiculous VAT MOSS rules, and the VAT flat rate scheme which should make life easier for small businesses but can trip them up. We also have news about incorrect penalties issued in respect of trust and estate tax returns.

This is an
extract from our topical tax tips newsletter dated 14 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

VAT MOSS 
All VAT MOSS returns must be submitted for calendar quarters, irrespective of the period for which the trader submits his domestic VAT returns. Thus the next VAT MOSS return must be submitted by 20 January 2015, for the quarter to 31 December 2015. 
  
This is just another example of how the VAT MOSS rules are a bad-fit for micro-traders. HMRC are starting to realise this, as they have issued new guidance on VAT MOSS for small traders. These are businesses with annual turnover below the UK VAT registration threshold, so they aren’t required to be registered for VAT in the UK. However, they must operate VAT MOSS. In theory just one international sale of an electronic service to a non-business consumer in another EU country brings the business within the VAT MOSS reporting regime. 
  
HMRC say they have analysed the VAT MOSS returns submitted so far. From this incomplete data HMRC have concluded that some people registered for VAT MOSS may not be in business. A person who is not “in business” doesn’t have to register for VAT MOSS as the supplies are not made in the course of a business. Problem solved!    
  
No, the problem is not solved. HMRC can’t accurately determine whether a trader is “in business” from three VAT MOSS returns, but they are writing to those people they believe aren’t “in business” suggesting the trader should deregister from VAT MOSS. If your client receives such a letter he will be confused, as HMRC is constantly telling people to declare all of their income for tax purposes. 
  
If you have advised your client to register for VAT MOSS, you will have already reviewed whether he is in business or not, and concluded that he is. If the international sales are merely part of a “hobby” and not part of a business, then you wouldn’t have advised the individual to register for VAT MOSS. 
  
For those small traders who decide to stay registered with VAT MOSS, a further concession is offered: they only have to retain one piece of evidence of where their customer is located. However, the trade needs to abide by the VAT laws of the country he is selling into. A concession applied by HMRC won’t necessarily be recognised by another EU tax authority.

This is an
extract from our topical tax tips newsletter dated 14 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


NIC avoidance, Late filing penalties, VAT MOSS TAN/newsletters

Tax was in the
news again last week for all the wrong reasons: the BBC uncovered a
blatant NIC avoidance scheme, and The Telegraph newspaper published a
leaked HMRC memo concerning late filing penalties. We explain how both
these issues could affect you and your clients. We also have news of
developments relating to the operation of VAT MOSS.

VAT MOSS


New rules for applying
local rates of VAT to digital services supplied across EU borders came
into effect on 1 January 2015, but guidance on how to account for the
VAT due under VAT-MOSS was released very late. A concession for UK
traders who aren’t VAT registered, to allow them to use VAT-MOSS without
having to charge VAT to their UK-based customers, was issued almost at
the last minute.


 


A second concession
concerns the records required to determine where the customer is based.
Small businesses are allowed to rely on the customer location
information provided by their payment service provider (eg PayPal). This
concession was announced as a temporary measure to apply to 30 June
2015, but it is now permanent for UK businesses who are not VAT
registered.


 


The role of the tax
agent in helping clients to comply with VAT-MOSS appears to have been
added as an after-thought in the design of that system. As a tax agent
you can’t register your clients for VAT-MOSS, but you can submit
VAT-MOSS returns on their behalf if you register as a VAT-MOSS agent.
Details of how agents can register were published on the GOV.UK website on 21 May 2015. The first deadline for submitting a VAT-MOSS return was 20 April 2015.


 


If your clients are
providing digital services they are likely to be invoicing
electronically as well. Take a look at the new guidance on electronic
invoicing in VAT Notice 700/63.


 


Finally for clients who
are disgruntled about the VAT-MOSS regime, there may be light at the
end of the tunnel. The EC has acknowledged in a report on the digital
single market the administrative burden that VAT imposes, and has
recommended there should be a common EU-wide VAT threshold to help small
e-commerce businesses. 

This is an
extract from our tax tips newsletter dated 4 June 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>


VAT-MOSS returns, RTI penalties, Auto-enrolment exemptions

The Parliamentary candidates are out banging on doors, appealing for votes. If you are bothered by such a call why not ask the candidate about: VAT-MOSS, RTI or auto-enrolment for pensions. These new processes have all made life more difficult for small businesses in the last five years. We also have further updates on these issues this week.

VAT-MOSS returns 
The first period for submitting VAT-MOSS returns opened on 1 April 2015. Those businesses who have registered for VAT-MOSS must submit their return by 20 April 2015, and pay any VAT due as reported under VAT-MOSS by the same date. Are you and your clients ready? 

The VAT-MOSS returns are always due by 20th of the month following the end of the calendar quarter, irrespective of when the UK VAT return is due. The VAT-MOSS return can be done online or by completing a very simple spread-sheet like template. If no digital sales have been made to non-business customers in other EU countries a nil VAT-MOSS return is required. 

The online version of the return may be easier to use as it contains some automatic calculation, which is missing from the spreadsheet template. The online return also has links to EU VAT rates, but you may find it easier to use the more direct link below. However, the trader also needs to report which VAT rate applies to their sale e.g. standard rate, reduced rate, zero rate etc. The same product will not necessarily attracted the same type of VAT rate in all EU countries. 

The value of each digital sale made from the UK and the amount of VAT due on each of those sales must be reported in pounds sterling. So if your client has priced their European sales in euros or other local currencies, those sales will have to be translated into £s. But which date should the business pick for calculating the relevant exchange rate: the date of sale or the end of the VAT period? 

In fact either date appears to be acceptable to HMRC. The VAT-MOSS guidance says if the trader has invoiced in currency other than sterling, that invoiced amount must be translated into sterling at the end of the calendar quarter. However, if the business automatically converts the foreign currency amount into sterling using an agreed daily or other periodic rate to use in their business accounts, those translated amounts should be used in the VAT-MOSS return.

This is an
extract from our tax tips newsletter dated 2 April 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>