Business-to-consumer supplies - E-services

These changes impact on business-to-customer (B2C) supplies including e-services.

From 1 January 2015, the place of taxation for certain supplies will be determined by the location of the customer.

Key points:

• If you supply broadcasting, telecommunications and e-services (BTE) to businesses only (including those who are self-employed) then these changes do not affect you.
• If you are a business supplying digital services to consumers, these changes will affect you, so you need to start planning for them now.
• If you supply digital services to a mix of businesses and consumers, then these changes affect you as far as the supplies to consumers are concerned.
• If your customer does not provide you with a VAT registration number (VRN), and you have no other information that suggests that your customer is in business and VAT registered, you can treat this as a B2C supply.
• If you supply consumers through an online store or gateway, and it is acting in its own name, then it will normally be considered to be supplying the consumer. This means that the online store or gateway will be responsible for declaring and paying any VAT due. You will be treated as supplying the store and so will be making a business-to-business (B2B), rather than a B2C, supply. If this is the case, these rule changes do not directly affect you.

There will be further changes to the agency legislation to reflect these rules for taxable persons acting in their own name on behalf of another when supplying telecommunication or e-services.

VAT MOSS (Mini One Stop Shop)

The place-of-supply rule changes could lead to a digital supplier having to register in each member state where they make supplies and suffer the administrative burden that comes with it; that’s a potential of 28 VAT registrations.

The VAT MOSS, which was implemented from 1 January 2015, gives the supplier an option of registering in just one member state and accounting for any VAT due to any member states through a single MOSS return.

This should remove the incentive for businesses to locate offshore and level the playing field for all BTE suppliers.

The aim is to reduce the administrative burden and associated costs of multiple VAT registrations.

There will be additional changes to the place-of-supply rules to align with other member states and to close minor loopholes used by certain anti-avoidance schemes.

See our guide to VAT MOSS for more information.