In the lastest of our Brexit series, we look at the position regarding the supply of services to EU consumers.
Telecoms, broadcasting & electronic services (TBE)
Since 2015 there has been a system called ‘VAT MOSS’ which has enabled UK businesses to declare and pay VAT on business-to-consumer (B2C) TBE supplies, such as apps, downloads, software etc. Because these services are taxed in the member state of the consumer, which could result in multiple VAT registrations for suppliers, the MOSS Scheme allowed UK businesses to register with HMRC and submit one VAT return showing the sales made to each member state with the relevant VAT.
From 1st January 2021, when the transitional period ends for the UK leaving the EU, these EU MOSS registrations will cease, and the UK businesses will be required to use the Non-Union MOSS scheme to account for VAT on TBE supplies to EU consumers. Where a business does not have a business establishment or a fixed establishment in the EU, it will be required to register in an EU Member State of their choice in order to remit the VAT due. In this case, you should apply for the non-EU MOSS registration by 31st January 2021.
There are different rules if you already have a fixed establishment/s in the EU.
Information on the MOSS Schemes can be found on the European Commission Europa Website.
Professional, technical, financial, intellectual and other intangible services
Currently, the place of supply of such B2C services from UK businesses to customers in the EU is where the supplier belongs (making them subject to UK VAT), whereas the same services to non-EU customers are seen as supplied where the customer belongs (meaning there is no need for UK suppliers to charge VAT).
With effect from 1st January 2021, the place of supply to all customers outside the UK will be where the customer is based so there will be no requirement for UK businesses to charge VAT on these services to such customers.
Certain other services
You need to continue to be aware that some services supplied to consumers will require you to register for VAT in the EU member state where the service takes place/ is delivered. These include; accommodation services carried out by non-established taxable persons; admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions; transport services; services of valuation and work on movable tangible property; services connected to immovable property, such as construction, architect and estate agent services; the supply of restaurant and catering services for consumption on board ships, aircraft or trains etc.
Following our exit from the EU, the tax authorities in EU member states may apply the rules more strictly.
Finally, the EC Commission has plans (from 1st July 2021) to extend the Non-Union scheme outlined above to all cross- border B2C supplies of services which are deemed to take place in a member state under the current place of supply rules (such as those mentioned above). The place of supply rules themselves are not changing, this is a simplification, and therefore if a supplier opts to use the Non-Union scheme, they must use the scheme to declare and pay VAT for all their B2C supplies of services in the EU; these supplies should not be declared through separate local VAT registrations.
A summary of the changes and the implementation calendar can be found in “Modernising VAT for cross-border e-commerce” here.
Our next edition will cover B2B supplies of services.
If you have any queries, please contact our Brexit Team at firstname.lastname@example.org or on 0330 088 7111.