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If you sell digital services online, such as e-books, apps, music or software downloads, the way you account for your VAT will be changing from 1 January 2015.

You should currently be accounting for VAT as a UK supply and, most of the time, you will be charging VAT at 20%.

From 1 January 2015, you will need to establish the location of your customer and also if they are a business.  Where your sale is to a non-business customer, you will have to charge VAT in the country where the customer is located (if that’s in the EU).

The impact of this is huge, as you will technically have to register for VAT in the customers’ countries (there is no VAT threshold for traders selling into the EU).

To help to reduce this administrative burden, HMRC are introducing a new system called VAT-MOSS. The system will be released in October 2014 and will allow you to account for VAT in the countries you are supplying.

In order to use this system, you must already be VAT registered in the UK.  If you are not currently registered because your turnover is below £81,000 you will need to select one of the options below from 1 January 2015:

– register for VAT in the UK
– stop selling digital services to non-businesses outside the UK
– sell via another business or online store
– register in each country you sell to and make the appropriate returns.

If you’d like some guidance on this please do get in touch, so that we can help you make the right decision for you.


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