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Quite simply, the MOSS system is a simplified way to declare and pay the VAT you owe across the EU in one place, normally in the country where you are also established, and VAT registered.
As is always the case with VAT, the detail is somewhat more tricky to follow.
One of the key concepts in VAT is the “place of supply”. This is the way that you know in which country a sale actually takes place.
For example, if a UK business sells software to a German business or individual, where does the supply take place?
There are a whole set of rules to determine where the supply takes place in such circumstances. The rules are different depending on whether the customer is a business or an individual and also in relation to the sale of specific goods and services.
As a whole manual could be written on this, it is not within the scope of this article to do so (in fact HMRC have written a manual covering services, called Notice 741A, available here).
Let’s assume that you have determined that the place of supply for your sales is not in the UK and is in fact based on where your customer is resident. It may be, for example, that you sell a subscription service through your website.
If the place of supply of each sale is in the country of your customers, small businesses are therefore faced with the burden of potentially having to register for VAT in every country in Europe. This is hugely difficult, given the differing tax systems and languages amongst other things.
This is where VAT MOSS comes in. MOSS stands for “Mini One Stop Shop” – a quite terrible name.
However basically, once registered for MOSS, you complete a quarterly return. The return is on a calendar quarter basis which may be different from your usual VAT return. On that return, you report all of your sales across relevant EU countries. The return is relatively straightforward, reporting the country, the VAT rate applicable to your sales in that country, and the amount of sales.
This can then be submitted to HMRC electronically and MOSS VAT paid to them. HMRC will then subsequently report this information to each of the separate tax authorities across Europe and pay over any VAT.
This is therefore a huge time saver for small businesses. Note that it is important (as ever) that these returns and payments are made on time. Failure to do so can result in the removal from the system, which could then cause some very difficult circumstances for small business owners.
Wisteria support many small businesses with VAT issues such as this. Please do contact us to find out how we can help.
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