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Introduction

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Digital Services are services supplied in electronic format and a number are listed below. (Not exhaustive)

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• Radio and Broadcasting

• Telecommunication - Fixed and mobile telephone services

• Electronically Supplied Services - online gaming, music, software, advertising space on a website, web hosting, online magazines etc

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VAT Liability of Digital Services

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• Standard Rated when supplied to UK customers.

• Outside the Scope of VAT when supplied to a non UK customer

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For supplies made to non UK customers, they may have to account for VAT in their country of operation or residence. 

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Digital Services supplied via Platforms

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Supplies of digital services via an online platform will mean that the online platform (and not the supplier) will be responsible for accounting for VAT to HMRC.

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Digital Services supplied to Private Individuals and Non Business Customers in the EU

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Where digital services are supplied to private individuals or non business customers in the EU, the supplier will have to either:

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• Register for the Non-Union VAT MOSS (Mini One Stop Shop ) scheme in an EU member state

• Register for VAT in each EU member state where you supply digital services to consumers

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Non Union Moss Scheme

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The non union MOSS ( Mini One Stop Shop ) scheme came into effect in early 2021. It effectively provides businesses selling Digital Services to non business customers with the option of registering with the scheme to file one EU wide VAT Return to cover all sales of Digital Services within the EU via a single return in one member state. 

 

The supplier will  have the option to choose which country to file the single VAT return and payment to and this will include the quantity and VAT rate applied to the goods or services supplied in each EU member state.

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The benefit of this scheme is that it:

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• Allows the Digital Service Trader to register for VAT in a Single EU member state rather than having to register in multiple member states where they sell services to their non - business customers.  

• Significantly reduces administration

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Note:  The Moss Scheme does not apply to business customers located within the EU as they will be covered under the Reverse Charge mechanism and they will self account for VAT in their own member state.

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Services Not Classed as Digital Services

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• Supplies of goods, where the order and processing is done electronically

• Supplies of physical books, newsletters, newspapers or journals

• Services of lawyers and financial consultants who advise clients through email

• Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)

• Offline physical repair services of computer equipment

• Advertising services in newspapers, on posters and on television

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How to  Determine if your Customer is a business or Private Customer

 

If your customer is a business customer and located in the EU, they will most likely have a member state VAT registration number and as such will be proof of being in business.  If the customer does not have a VAT registration number (maybe because they are below the local threshold) then so long as you can obtain other evidence of them being in business from other means, then you can treat the supply as B2B and not charge VAT. 

 

If the customer cannot provide evidence of being in business, then a business supplying the Digital Service should:

 

• Treat the supply as B2C 

• Charge VAT at the relevant EU member state where the service was supplied.

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-Contains public sector information licensed under the Open Government Licence v3.0.

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