If you’re offering a digital service to consumers, it’s important to consider whether any VAT implications may apply. Governments around the world have worked hard to start to establish exactly what quantifies a digital service, laying out rules and going back and forth on what quantifies “electronically supplied” goods or services, and what doesn’t. Before enquiring about VAT and implications on your business, it's important to have a clear understanding of your place of supply, to determine whether your consumer is a person or a business (this has tax implications), as well as isolating their primary location. Once this has been established, you can start learning more about how to remain VAT compliant.
When supplying digital services to consumers or businesses in the UK, it's important to first consider what the government refers to as a digital service. As of 2019, this includes:
Each of these sections has an extensive subsection list including particulars about they types of services the UK government considers to be digital. Find out if your service falls within this before considering any VAT implications related to offering it to consumers.
If you’re selling digital services exclusively through digital platforms and marketplaces, these will take on responsibility for the accounting of the VAT due. In other circumstances, you need to keep in mind how you will be accountable for VAT on supplies of digital services to your customers. Start by researching the supply rules. This may lead to a process of registration for Union VAT MOSS, or alternatively, based on the location of your customer, you may need to register for VAT in each of the EU states where you are supplying your service.
If your supplies fall below the £8,818 threshold and are made in the UK, it is best to add these to your other taxable supplies. In this case, you will need to register for UK VAT to get access to the UK VAT MOSS scheme. You can then account for VAT on your EU cross-border B2C supplies, but will not have to account for any VAT on domestic supplies on your own. Talk to an expert about this, as you may be able to reclaim any VAT charged on business expenses related to cross-border digital service supplies.
As we head into the 2020’s, it’s important to keep in mind that digital tax legislation is constantly changing and evolving as a result of the rapid advancement of modern technology and the rise of online businesses as a whole. It makes sense to keep abreast of these changes, following the news and having the right contacts to help you with any questions around changes, as well as to ensure your business remains compliant. VATGlobal has done this for over ten thousand clients, and would love to support you in your VAT compliance efforts moving forward.
While this article aims to provide an overview of the technicalities around VAT, it should not be considered a legal authority on the matter. You are encouraged to talk to a specialist if you need more information, or if you have specific questions about the processes mentioned.