HMRC has issued Brief 4/2016 entitled VAT MOSS (VAT Mini One Stop Shop), which concerns simplifications for businesses trading below the VAT registration threshold.

It outlines the simplifications available to businesses trading below the UK’s VAT registration threshold, which is currently set at £82,000, that make supplies of digital services (such as telecommunications, broadcasting or electronically supplied services) to consumers in other European Union Member States. Brief 4/2016 announces two new areas of help for the smallest businesses in addition to some simplifications that are already in place.

Place of supply requirement from 1 January 2015

From 1 January 2015 the place of supply of cross-border digital services is the place where the consumer of that service is normally resident. Firstly, businesses need to determine where their customers are located. There are specific rules in place for certain types of transactions. For all other supplies of digital services the general rule is that businesses must collect two pieces of non-contradictory information to evidence the customer’s location. More specific information about this obligation is available from the gov.uk website.

Simplification of customer location determination

HMRC have previously allowed UK businesses that are below the UK VAT registration threshold and registered for VAT MOSS, to base their customer location decisions on a single piece of information provided to them by their payment service provider. HMRC introduced this simplification in response to feedback from small businesses that said that they found it difficult to obtain two pieces of evidence.

Determining the customer location on best judgment

However, in the latest guidance, HMRC say that they recognise that some small businesses have still found this difficult. Consequently, they have now said that they will allow businesses below the UK VAT registration threshold to ‘exercise their best judgement’. This means businesses can rely on any single piece of information, such as the address provided by the customer, to determine where their customer is located. This additional flexibility should provide additional help for businesses below the UK VAT registration threshold.

Brief 4/2016 can be found here.