Summary of the proposed Mini-One-Stop-Shop for VAT accounting on the supply of digital services after 1 January 2015

1. Briefing paper: Mini one stop shop
With the advent of modern technology and the internet, it has become necessary to amend the
rules for taxing the supply of telecommunications, broadcasting and electronically supplied
services (TBES). On 1 January 2015, the 'place of supply' of such services will change to the
country where the 'consumer' is established. Suppliers will either need to register for VAT in
every Member State where TBES supplies are made or make use of an EU-wide accounting
system known as the 'mini one stop shop'.
What's the issue?
The 'place of supply' rules – which determine the
jurisdiction within which a supply of goods or services
takes place and thus the Member State entitled to collect
the VAT due on the supply – are about to undergo
something of a revolution. On 1 January 2015, the rules
which determine the place of supply of TBES services
supplied to consumers (B2C supplies) are to change.
Under current rules, the place of supply is determined as
being in the country where the supplier belongs, has a
business establishment or usually resides. However, for
B2C supplies, from 1 January 2015, the place of supply
will be the Member State of the consumer.
The main consequence of this change is that VAT will
be due in each of the Member States in which TBES
supplies are made. Suppliers therefore have a choice.
Either they can register for VAT in each Member State
(up to 27 separate VAT registrations) or, they can elect to
register under an EU-wide scheme known as the mini
one stop shop (MOSS).
MOSS registration
In actual fact, from 1 January 2015, there will be two
separate MOSS schemes. One for non-EU based
suppliers and one for EU based suppliers. The Non-EU
scheme replaces the current VAT on Electronic Services
(VoES) scheme.
Registration for both schemes will be available in the
United Kingdom from 1 October 2014. However,
registration under the MOSS scheme is voluntary.
Suppliers which choose not to register under MOSS will
be required to register for VAT in any Member State
where they make a supply of TBES services to
consumers. There is no de-minimis turnover threshold
so, for suppliers preferring not to register under MOSS,
they will be required to register for VAT in a Member
State irrespective of the value of such sales in that state.
Where suppliers have a business establishment in a
Member State, they cannot use the MOSS scheme to
account for VAT on supplies in that state. They will be
required to account for VAT there using a 'local' VAT
registration.
UK VAT groups
According to guidance published by HMRC, a UK VAT
group will be entitled to register under the MOSS
scheme. As a VAT group operates as a single taxable
person under a single VAT number, supplies of TBES
services on a B2C basis made by members of a VAT
group will be regarded as made by the group's
representative member. However, the law relating to
VAT groups is different in each Member State.
Businesses with group registrations outside the UK will
need to check the particular rules in the countries where a
MOSS return is to be filed.
Small businesses
To register under the MOSS scheme, a business will have
to be registered for VAT. UK businesses trading below
the current VAT registration threshold (£81,000) will not,
therefore be able to use the MOSS scheme. Instead, they
will have to register for VAT in their customer's country
and account for VAT on sales through a local VAT
return.
We understand that HMRC is aware of this anomaly
and has brought it to the attention of the EU
Commission. Unfortunately, the Commission simply
points to the fact that the UK has a very high turnover
threshold compared to other Member States and is not
inclined to alter the MOSS rules. Small business could
choose to voluntarily register for UK VAT but this is
likely to have an impact either on prices charged to
customers or on profitability.

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Multiple establishments
Business that have establishments in multiple Member
States are entitled to register for and operate MOSS in
whichever Member State they choose. For example, a UK
business with establishments in both France and in
Germany could, if it wished to, elect to register for the
MOSS scheme and account for VAT in France or
Germany. Wherever a business registers, it will normally
have to remain registered there for a minimum of two
years.
MOSS returns
MOSS returns are only to be used for accounting for
VAT on the supply of TBES services and, in the UK, are
to be submitted on a calendar quarter basis. MOSS
returns must be submitted electronically within 20 days of
the quarter end. Depending on the volume of TBES
transactions, businesses registered for UK VAT with
calendar quarter VAT returns may, therefore, want to
consider adopting a different quarter end for the
submission of UK VAT returns. Once registered under
the MOSS scheme, nil returns will be required in periods
when no TBES services have been supplied.
When a MOSS return has been completed and
submitted, the system will generate a unique reference
number for the return. The portal will allow businesses to
partly complete a return, save it and return to it at a later
date. The system will also accept electronic file formats
such as .xml and .csv. In the UK, the currency for the
MOSS return will be GBP £ and the rate of exchange to
be used to convert other EU currencies to GBP £ will be
published by the European Central Bank. No other
exchange rate will be allowed.
In situations where an error has occurred on a MOSS
return, any corrections must be made to the original
return. In other words, adjustments for errors will not be
allowed to be made on subsequent returns. Each Member
State is to fix a time limit for corrections to be made so
businesses will need to familiarise themselves with the
error correction rules.
Once the MOSS return has been completed and a final
amount of VAT due has been calculated, the total
amount of VAT due must be paid by the 20th of the
month following the quarter end. Exact details of the
payment facilities are to be announced shortly but
HMRC has made it clear that a payment is only deemed
to have been 'made' when it reaches the Member State's
bank account. Similarly, there will be no facility for
payment to be made by direct debit and there will be no
ability to negotiate payment plans or deferred payment
mechanisms.
MOSS compliance
The entire MOSS system depends on affected businesses
complying with the scheme rules and regulations relating
to registration and VAT accounting via the MOSS
returns. To ensure compliance with these rules,
businesses registered in the UK under the MOSS scheme
will be subject to periodic audits by the tax authorities in
each Member State where they supply TBES services to
consumers.
In order to prevent multiple and / or frequent audits,
special arrangements have been agreed between Member
States. In simple terms, audits will be co-ordinated by the
Member State within which the business is MOSS
registered. In the UK, it is likely that MOSS audits will
take place at the same time as ordinary VAT inspections.
In certain cases, it is possible that inspectors from the
Member State of consumption (ie where the consumer
belongs) will also attend along with an HMRC inspector.
What to do now
Businesses supplying TBES services have little time left
to prepare for these significant changes. With just over
six months to go until the new rules are introduced,
affected business need to ensure that they are well
prepared. It will be necessary to make an early decision
on whether to register for VAT separately in each
Member State or whether to register voluntarily under the
MOSS scheme.
Businesses will be able to apply for MOSS registration
in the UK from October 2014.
Grant Thornton can help
Grant Thornton has a Europe-wide VAT service with
over 100 staff experienced in dealing with the '2015
changes'. If you require any further information or would
like to discuss how Grant Thornton may help your
business to be prepared for the changes, please contact
any of the contacts listed below.
Karen Robb Alex Baulf
VAT Partner VAT Senior Manager
T 020 7728 2556 T 020 7728 2863
E Karen.robb@uk.gt.com E alex.baulf@uk.gt.com