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Indirect Tax Update 46/2014

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Indirect Tax Update 46/2014

  1. 1. Indirect Tax Update for week ending 12 December 2014 Headline this week is that HMRC has confirmed the rumour regarding UK VAT registration for smaller UK businesses supplying digital services to consumers in other Member States. HMRC has published Revenue & Customs Brief 46/2014. We had heard a rumour that this announcement was to be made. The brief confirms that smaller businesses which are not currently registered for VAT in the UK (because they trade below the VAT registration threshold) and which sell digital or electronic services to consumers in other Member States of the EU can now register for UK VAT. Affected businesses can now register for UK VAT and, in turn, register for the Mini-One-Stop-Shop (MOSS) scheme. However, even though they will be VAT registered in the UK, they will not be required to account for any VAT on their UK sales. Similarly, even though they will be registered for UK VAT, HMRC make it clear that affected businesses will not be entitled to reclaim any input VAT incurred on costs relating to UK sales. Prior to this announcement, smaller UK businesses which were not registered for VAT could not take advantage of the MOSS registration scheme. Consequently, they either had to register for VAT in every Member State in which they made digital sales or face having to register and account for UK VAT on UK sales. Either way, smaller businesses faced increased costs and faced a fiscal barrier to doing business in Europe. The problem has been known about for many months and this solution shows that HMRC has listened to smaller businesses in the UK. It’s a shame that this could not have been announced much earlier in the process. Businesses trading below the UK VAT registration threshold will undoubtedly be pleased with this simple, yet pragmatic solution. Comment – Whilst the arrangement does provide a pragmatic solution for UK businesses, it is not clear whether it will be accepted by the EU. Under UK VAT law, a 'taxable person' has a special status. A taxable person is any person who is, or who is required to be registered for VAT. Any business registering for UK VAT under this concessionary arrangement will, therefore, automatically become a 'taxable person' and, as such, would, ordinarily, be required to account for VAT on sales and be entitled to reclaim VAT on purchases. It will be interesting to see if the EU accepts the simplification arrangement. The Commission has been aware of the problem for many months and has simply said that the problem was solely of the UK's own making due to the UK's high VAT registration threshold. For further information in relation to any of the issues highlighted in this Indirect Tax Update please contact: Karen Robb karen.robb@uk.gt.com Stuart Brodie stuart.brodie@uk.gt.com Andrea Sofield andrea.sofield@uk.gt.com Richard Gilroy Richard.gilroy@uk.gt.com © 2014 Grant Thornton UK LLP All rights reserved ‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication. www.grant-thornton.co.uk Indirect Tax Update 46/2014

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