HMRC Announces That Smaller Businesses Will No Longer Be Obliged To Charge VAT On Domestic Sales.

Every business needs a bit of Christmas cheer, especially the smaller ones.

For many small businesses it can be difficult to make ends meet, particularly when times are tough. But Steven Glicher accountants are happy to bring you some good news on that front. For once HMRC has decided to play Santa, and is about to give a seasonal boost to small businesses.

So what Christmas present are we talking about here?

Well, HM Revenues and Customs has agreed to tweak a controversial VAT ruling that thousands of UK business owners claimed was putting their livelihoods at risk.

So what was this VAT problem for small businesses? Well, a new EU regulation, which was set for enforcement from 1st January 2015, would have forced UK businesses selling digital services across Europe – services like e-courses and e-books, to register for VAT in each of the individual nations they sold their products to. The EU justified this ruling on the grounds of simplicity and transparency as VAT on digital products would be chargeable in the place of purchase as opposed to the place of supply.

To facilitate the change and to make administration easier for smaller businesses, small business owners can register for a VAT ‘Mini One Stop Shop’ (VAT MOSS), by registering for VAT in the UK. VAT MOSS would then funnel these tax payments automatically. However, the seller would be still be liable for VAT domestically, even if they fell below the VAT registration threshold.

Last week, however, HM Revenue and Customs, (HMRC) acknowledged that although micro firms must register for VAT in the UK to take advantage of MOSS, they will no longer be forced to charge UK VAT on domestic sales.

A spokesperson for HMRC said:

“Businesses below the current VAT registration threshold that can separate their sales to UK customers from sales to EU customers can voluntarily register the cross border element of their business, and then use that registration number to register for MOSS.

“This means that their domestic sales will remain VAT free.”

Will this change affect many small businesses? Well, the Office for National Statistics, (ONS) estimates there are 460,000 sole traders operating in the UK. Hopefully the changes announced by HMRC might give small business owners a little extra breathing space.

If you would like more information on the new EU directives on VAT registration and payment, or further information on VAT MOSS registration, then contact Steven Glicher accountants on 0161 485 8007, or email

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