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Effect to your business of Brexit in 2021: update on MOSS

Aiki Kuldkepp Aiki Kuldkepp

If a business supplies telecommunications, broadcasting and electronic (TBE) services to final consumers (B2C) in the UK, it will not be able to use the Mini-One-Stop VAT (MOSS) to report and pay any VAT that will be due in the UK after the end of the Brexit transition period in 2021. The business needs to complete a UK VAT registration to continue declaring such sales in the UK from 2021.

UK businesses will lose an option to make use of the Union scheme for MOSS reporting. From the end of the transition period the UK suppliers of TBE services will be required to register in one of the EU Member States (MSs) under non-Union scheme of the MOSS.

What is EU MOSS reporting for TBE services?

A special place of supply rule applies to TBE services provided to final consumers residing in the EU. Those services are subject to VAT in the country where the customer is located.
Suppliers not established in the MS of the customer do not have to register in a MS where the customer resides if they make use of MOSS scheme for declaring and paying the VAT due.

Union scheme

MOSS allows an EU business to submit a VAT return for each calendar quarter in its own MS and allows for a single payment to this MS who forwards the VAT payments to the various EU MSs of consumption.

Non-Union scheme

Suppliers not established in the EU can choose one of the EU MSs for declaring and paying the VAT via non-Union scheme of MOSS.

What happens after the transition period?

EU suppliers providing TBE services in UK

EU suppliers making currently use of “Union scheme” of MOSS for declaring and paying UK VAT will not be able to use the MOSS to report and pay any VAT that could be due in the UK after the end of the transition period. Consequently, EU suppliers who supply TBE services to final consumers in the UK after 2021 will have to comply with the rules applicable in the UK and complete a UK VAT registration to continue declaring their UK sales from 2021.

Non-EU suppliers providing TBE services in UK

Suppliers established in a non-EU country/third territory identified in one of the MSs’ “non-Union scheme” will not be able to use the MOSS to report and pay any VAT that will be due in the UK after the end of the transition period. They will have to comply with the rules applicable in the UK and complete a UK VAT registration to continue declaring their UK sales from 2021.

Any non-EU provider who is identified in the UK and uses the UK “non-Union scheme” to file their pan-EU MOSS returns will need a UK VAT registration and a new (non-Union) MOSS registration / return in another EU MS to continue reporting TBE services in EU.

No VAT registration threshold for non-residents

For foreign businesses trading in UK, the VAT registration threshold is nil. Non-established businesses that do not have an establishment in the UK and make TBE supplies to final consumers in UK are obliged to register for VAT, regardless of the value of those supplies. Following the rules of Making Tax Digital (MTD) and appointing an agent/representative may also be required.

UK suppliers providing TBE services in EU

Suppliers established in the UK and identified in the UK “Union scheme” who will continue supplying TBE services to customers in the EU will have to switch to and make use of the “non-Union scheme” in one of the 27 MSs. They should comply with local registration and compliance requirements which may include an agent or fiscal representative. Suppliers established in the UK and identified in the UK “Union scheme” who are also established in a MS should move their identification for the “Union scheme” from the UK to this MS.

Compliance deadline for UK suppliers

Any UK providers of TBE services to EU consumers must file their last MOSS return with HMRC by the end of 20 January 2021. They can amend their UK VAT MOSS returns using the UK VAT MOSS system until 20 January 2022.

Rules applicable to NI

Changes applicable to UK include the Northern Ireland (NI) since transactions involving services are not covered by the special protocol for NI. Consequently, no special rules apply for the NI with regard to the B2C TBE services and the suppliers that are currently providing TBE services to final consumers in NI also have an obligation to register for VAT in the UK since MOSS simplification will no longer be available for them. NI suppliers who supply TBE services to final consumers in the EU will have to switch to “non-Union scheme” of MOSS.

MOSS will be extended to OSS as from July 2021

As from 1 July 2021, the existing MOSS will be extended to a One-Stop Shop (OSS) and will cover all B2C supplies of services as well as distance sales of goods (including imports). There will be no need to register and file VAT returns in all EU MSs where the customers reside. Sellers will still be obliged to charge VAT of the customer MS, however, this VAT will be reported via a quarterly return in one MS under One Stop Shop (OSS) scheme. OSS cannot be used for reporting supplies made in the UK (with the exception of Northern Ireland what concerns the distance sales of goods).

Grant Thornton’s international indirect tax team and digital advisory team can assist you in your VAT / customs matters, compliance and update of your systems and processes. Please contact us if you would like to discuss.

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