HMRC issues updated guidance on VAT on digital services.

HMRC has updated its guidance on VAT place of supply rules for business that sell digital services to private consumers in the EU.

The changes apply from 1 January. For businesses established in the UK the rules apply where a UK business:

  • ‘charges consumers for digital services
  • supplies services from the UK to private consumers in another EU member state
  • has EU consumers that are not VAT-registered businesses
  • does not sell digital services through a third-party platform or marketplace (not your own website).

For cross-border supplies of digital services on a business-to-consumer basis, the place of supply will be the UK on or after 1 January 2019 if:

  • your business is not established in any other EU member state
  • the total value of the cross-border digital sales is less than £8,818 in the current year and previous calendar year.

The place of supply of any digital services made before 1 January 2019 will be where the consumer is located.’

The guidance also states that ‘If the annual value of your total cross-border supplies of digital services to consumers in the EU in the current year and previous year is:

  • below the threshold, the place of supply is the UK
  • over the threshold, the place of supply is where the consumer is located’.

From 1 January 2019, UK businesses under the digital services threshold can elect to treat the place of supply as where the consumer is located.

You can find the conditions for the election and guidance online.

Of course, if we leave the EU on a “no deal” basis this may all change from April 2019.

Article from ACCA In Practice