VAT: businesses supplying digital services to private consumers

New guidance covering the recent changes to the place of supply of digital services from 1 January 2015 is available from the GOV.UK website.

The new guidance may be accessed via this link to the GOV.UK website.

The services covered by the changes are digital services otherwise known as Broadcasting, telecommunications and electronic services (BTE).  This has been well publicised change and the guidance reflects the current knowledge with additional help and supporting material.

There is greater detail on what falls within the definition of digital services, split into the three categories of broadcasting, telecommunications (transmission of signals of any nature by wire, optical, electromagnetic or other system) and electronically (e-services that are electronically supplied) supplied.  Supplies that are unaffected by the change include:

  • Supplies of goods, where the order and processing is done electronically;
  • Supplies of physical books, newsletters, newspapers or journals;
  • Services of lawyers and financial consultants who advise clients through email;
  • Booking services or tickets to entertainment events, hotel accommodation or car hire;
  • Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network;
  • Offline physical repair services of computer equipment;
  • Advertising services in newspapers, on posters and on television.

E-services are those that are automatically delivered over the internet or electronic network where there is minimal or no human intervention, for example:

  • Where the sale of the digital content is entirely automatic when a consumer clicks the ‘Buy Now’ button on a website and either:
    • The content downloads onto the consumer’s device;
    • The consumer receives an automated e-mail containing the content;
  • Where the sale of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an e-service.

See the European Commission’s Taxation and Customs Union website.

Care must be taken on the bundled or multiple supplies, this follows the established principles and these services should be looked at on a case by case basis.  The VAT Mini One Stop Shop (VAT MOSS) is a system available to registration for all businesses that fall within this regime, without which businesses supplying digital services may be obliged to register in the most extreme circumstances in all 28 EU member states.

To support micro businesses until 30 June 2015 HMRC are offering help to micro businesses that are registering for VAT MOSS.  Micro businesses are those trading below the VAT registration threshold, currently £81,000.  HMRC are allowing micro businesses to base their customer location VAT taxation and accounting decisions on information provided to them by their payment service provider.  This means the business need not require further information to be supplied by the customer for this transitional period and will give micro business time to adapt their websites to meet the new data collection requirements.

ACCA has also produced a Guide to VAT MOSS.