HMRC extends #VATMOSS payment provider concession indefinitely

Important VATMOSS update
On 1 December 2016 the European Commission announced a package of proposed reforms to the VATMOSS scheme. Please read this post for the latest updates, as some of the proposed changes may affect the situation described in the post below.

I’m back from WordCamp Europe in Seville, Spain, where I asked my audience “How many of you have heard of VATMOSS?” and about 25% of the crowd put their hands up. I then said “How many of you haven’t heard of VATMOSS?” and about 20% of the crowd put their hands up. The other 55% were too hot to move.

Here in the UK, HMRC has confirmed a small but critical update to its VATMOSS compliance information for UK microbusinesses. The Agent Update is a bulletin written for tax professionals and advisors, not businesses or the general public, but its 23 June update included the following piece of information:

VAT Mini One Stop Shop

Micro-businesses that are below the current UK VAT registration threshold and who have registered for the VAT Mini One Stop Shop, may continue to base ‘customer location’ VAT taxation and accounting decisions on information provided by the payment provider. These transitional arrangements, which were originally until 30 June 2015, have been extended indefinitely.

This links to HMRC’s information on MOSS-registered microbusinesses, which says

UK micro-businesses, that are below the current UK VAT registration threshold and are registered for the VAT Mini One Stop Shop (VAT MOSS), may base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider.

Originally HMRC gave UK microbusinesses six months to continue to base a customer’s place of supply location –  information which determines the tax burden for the transaction – on the information provided by the payment provider. You’ll recall that payment providers and intermediaries were simply expected to reprogram their systems to pass those multiple data points to sellers, even if – as happened with so many of them – they had never heard of VATMOSS nor had been informed of it by their tax authorities or accountants. Because the multiple data points required by the Place of Supply reforms qualify as personally identifiable information, sellers and microbusinesses, in turn, were expected to begin processing and storing this data for ten years in line with UK and EU data protection principles, even if they are one-man bands or low-sales projects.

While HMRC’s announcement does not address those technical or practical issues, it is an important concession for two reasons.

One, it concedes that with the best will in the world, neither payment processors nor microtraders are necessarily capable of acquiring, transmitting, or storing the information the Place of Supply reforms require. It is a quietly bold affirmation that the legislators genuinely did not know what they were talking about when they drew up the roadmap for VATMOSS implementation.

And two, it concedes that tax authorities can’t be bothered either with the burdens that the reforms place on microbusinesses, sole traders, and the self-employed. That’s not to say that these traders should be permitted to operate outside tax law – far from it. It simply says that going after a self-publishing writer over a five cent discrepancy caused by the difference between a 20% and 25% VAT rate on a £1 ebook, contingent on which country the buyer was holidaying in when they downloaded it, is a game not worth the candle.

P.S. At WordCamp, during questions, Joost from Yoast (who really does look like his cartoon) reported that they have been contacted by four different European tax authorities asking Yoast to register directly with the authorities. The whole point of the MOSS portal system was that businesses would not have to do that in the first place. Joost’s comment suggests that European tax authorities still don’t understand what’s happening here. Aside from that, the Yoast team has worked hard to build a strong and successful business, and if they had to, they can pay an accountant to register with four national tax authorities for them. What if they were still just starting out from a home office?

About the author
Heather Burns is a digital law specialist in Glasgow, Scotland. She researches, writes, publishes, consults, and speaks extensively on internet laws and policies which affect the crafts of web design and development. She has been designing and developing web sites since 1997 and has been a professional web site designer since 2007. She holds a postgraduate certification in internet law and policy from the University of Strathclyde. Learn about hiring Heather to write, speak, or consult.