Place of supply VAT rule changes to be clarified by HMRC

Those running a contractor limited company may be intrigued to read of new VAT place of supply rules.

The altered rules take effect from January 2015, and are relevant to all contractors and other VAT-registered suppliers of Internet services to EU customers. Any such VAT-registered firms  that would like to better understand how the rules will apply to them should contact SAIL Business Solutions, however here is a brief overview of this rule change.

The changes affect such firms - including some contractor limited companies - by switching the place of supply, and hence the taxation, for business-to-consumer supplies from the location of the supplier's establishment to the residence or location of the EU customer.

Presently, those providing services to individual consumers in the EU charge VAT based on where the service is supplied. Companies providing such services from the UK, therefore, would levy VAT at 20 per cent, declaring and paying it through their UK VAT return with HMRC.

However, from next year, if a given VAT-registered firm in the UK offers a product like downloadable software to individual consumers in the EU, the VAT that they charge must be that of the EU nation where the customer is located while downloading the service.

The need to then pay this VAT to the relevant country will mean that a UK supplier can use the VAT Mini-One-Stop-Shop (MOSS) to ascertain exactly what is payable in VAT in any of the other EU member states. In addition to collecting the VAT, this service further lessens a supplier's administrative burden by distributing it to the appropriate countries on their behalf.

For detailed information on how this issue may affect your firm, contact SAIL Business Solutions through the website at www.sailsolutions.co.uk.

Editor’s Note: SAIL Business Solutions (http://www.sailsolutions.co.uk) are represented by the search engine advertising and digital marketing specialists Jumping Spider Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959 / +34 952 783 637.