Revenue and Customs Brief 4 (2016) sets out simplifications available to businesses trading below the value added tax (VAT) registration threshold (which in the UK is currently GBP 82,000) and making supplies of digital services to consumers in other EU states.

Since 1 January 2015 the place of supply for digital services supplied to consumers and other non-business customers in the EU has been the place where the customer belongs. Businesses making these supplies have therefore been liable to register for VAT in each country where they supply digital services.

To help these businesses the VAT Mini One Stop Shop (VAT MOSS) system was introduced. This allows VAT to be declared and paid on sales of digital services to EU customers using a single return and payment. This can be done in the home member state so there is no need to register in each state where VAT is due.

Evidence of Customer Location

The UK introduced additional measures reducing the impact on smaller businesses including allowing customer location decisions to be based on information provided to them by their payment service provider. This was an alternative to having to supply two pieces of evidence to show the location of the customer.

Some small businesses have however still found it difficult to supply the required information on customer location. HMRC has therefore further simplified the requirements to allow small businesses to make a judgment on customer location based on only one piece of information.

Supplies in course of furtherance of a business

There is no registration threshold in relation to cross-border supplies of services, so all businesses however small fall within the scope of the changes. Businesses may register to use VAT MOSS for their cross border sales and they can still benefit from the UK VAT registration threshold if their taxable turnover is under GBP 82,000 so they do not need to account for VAT on supplies to UK consumers.

This only applies however where supplies are made in the course or furtherance of a business. HMRC notes from returns sent in by UK businesses that some of those registered for VAT MOSS may not be in business for VAT purposes. These businesses will therefore be contacted by HMRC to clarify the situation.