Brexit and the VATMOSS

What happens when we are no longer an EC Member State?

Unless something dramatic happens in the next few months the UK will leave the EU on 29 March 2019 but, at present, no-one knows whether we will leave with or without a deal or, if we do leave with a deal, whether that deal will enable us to continue to operate in the same way with the EC as we do now.

All that is clear is that without a deal the status quo will not be maintained, and we will no longer be treated by the EC or be able operate with the EC in the same way as we are now.

So, in a no deal scenario, what would that mean for UK based businesses that currently use VATMOSS via their HMRC online portal to declare the VAT due on sales of digital services to non-business customers in the EC?

Essentially, although UK businesses would still be required to use VATMOSS to declare the VAT on their digital sales to non-business customers in the EU, they would no longer have access to VATMOSS via their UK HMRC online portal.

Instead, UK based businesses would have to register for VAT in one of the other, remaining EC Member States so that they then have access to an EC Member State portal through which they can then register to use VATMOSS.

However, as we will no longer be part of the EC, they will need to register to use ‘Non-Union VATMOSS’ instead of ‘Union VATMOSS’, although the principals of both systems are the same.

Unfortunately, this cannot be done until after the UK leaves the EU, which leaves a very small window of opportunity to register for Non-Union Moss if a UK business makes sales of digital services to non-business customers in the EC between 29 – 31 March 2019 as the business needs to register by 10 April 2019. If a business makes sales in April 2019 then the business must register for Non-Union VATMOSS by 10 May 2019.

It should also be remembered that if a business does not register for Non-Union VATMOSS in one of the remaining EC Member States then the business will create a requirement for it to be registered for VAT in every EC Member State in which they make supplies of digital services to non-business customers.

UK businesses may therefore now want to start to consider which EC Member State they want to register for Non-Union VATMOSS in. After all who knows how long it takes for a UK based business to register for VAT and for VATMOSS in, let’s say, Lithuania or Ireland!

For more on VAT issues visit VAT Questions and Answers