Contractors’ Questions: What about VAT MOSS if there’s no Brexit deal?

Contractor’s Question: We're using the VAT MOSS scheme as we sell a digital product to individuals globally including in EU member states. In the government’s newly published ‘VAT guidance for businesses if there’s no Brexit deal,’ it states:

"If the UK leaves the EU with no agreement, businesses will no longer be able to use the UK’s Mini One Stop Shop (MOSS) portal to report and pay VAT on sales of digital services to consumers in the EU.

“Businesses that want to continue to use the MOSS system will need to register for the VAT MOSS non-Union scheme in an EU Member State. This can only be done after the date the UK leaves the EU. The non-union MOSS scheme requires businesses to register by the 10th day of the month following a sale. You will need to register by 10 April 2019 if you make a sale from the 29 to 31 March 2019"

It would seem, at short notice of a no-deal, we would have just 10 days to register in "an EU Member State". Which one and how? Or "alternatively, a business can register in each EU Member State where sales are made," the guidance adds. This sounds overly burdensome; is it? What can we do to prepare? Please help.

Expert’s Answer: You are correct in that HMRC’s guidance means that, in the event of a ‘no-deal Brexit,’ every UK business providing B2C e-services into the EU will have a decision to make, either:

• to register for Non-Union MOSS in one Member State; or
• register for VAT individually in each of the Member States where it is required to account for VAT.

Clearly, registering for VAT in potentially 27 different Member States would be commercially and administratively more cumbersome.  

As to which Member State a business chooses to register for Non-Union MOSS in, businesses are free to choose whichever one suits them. This is therefore an almost entirely commercial decision.

It is in effect no different from the current rules applying to businesses not established in the EU. To illustrate this, many US businesses that are required to account for VAT in the EU choose to register for Non-Union MOSS in the UK, purely because of the English language. If a business has an office in the EU, they need a more tailored answer.  

In terms of preparing for a ‘no-deal’ scenario, all business should now review and prepare to register for Non-Union MOSS in an EU Member State. As all the EU portals operate in their own language, Ireland would seem to have an advantage over other states.

There is also likely to be a cost differential so businesses should now review their structure and language skills, for example, when choosing where to register. Our firm, Kingston Smith, is part of a worldwide association of accountancy firms, Morison KSi, meaning we have associates in every Member State who can advise on Non-Union MOSS issues.

This will also affect all non-EU-based businesses who currently use the UK as a centre for MOSS, as they will need a UK VAT registration and a Non-Union MOSS registration in a Member State.

The expert was Debbie Jennings, VAT director at chartered accountancy firm Kingston Smith LLP.