VAT and new rules for digital services

If you supply digital services to consumers in other EU countries, you should be aware that new VAT place of supply rules apply from 1 January 2015.

Digital services means broadcasting, telecommunications and e-services, with e-services especially being a fast changing area. They include everything from downloaded apps, e-books and anti-virus software, to video on demand and music downloads.

HMRC treats business-to-business (B2B) supply of services as the place where your customer is situated, so there are no VAT implications for a UK business selling to other EU countries. These rules are not changing.

From 1 January 2015, the business-to-consumer (B2C) rules mirror the B2B treatment, replacing the old rule, under which B2C supplies were regarded as made where the supplier was situated. VAT is therefore now payable in the country where the customer is situated and at that country’s rate of VAT.

With B2C supplies, the customer is a consumer and is therefore not registered for VAT, so the supplier remains liable for the tax.

Rather than having to register in every member state you supply to, an easier alternative is to use HMRC’s online VAT mini one stop shop. You then just submit a single quarterly return and payment, and HMRC does the rest on your behalf. Let us know if we can help.