VAT MOSS, VAT flat rate scheme, Trust tax returns

This issue highlighted two VAT issues which affect small businesses; the ridiculous VAT MOSS rules, and the VAT flat rate scheme which should make life easier for small businesses but can trip them up. We also have news about incorrect penalties issued in respect of trust and estate tax returns.

This is an extract from our topical tax tips newsletter dated 14 January 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

VAT MOSS 
All VAT MOSS returns must be submitted for calendar quarters, irrespective of the period for which the trader submits his domestic VAT returns. Thus the next VAT MOSS return must be submitted by 20 January 2015, for the quarter to 31 December 2015. 
  
This is just another example of how the VAT MOSS rules are a bad-fit for micro-traders. HMRC are starting to realise this, as they have issued new guidance on VAT MOSS for small traders. These are businesses with annual turnover below the UK VAT registration threshold, so they aren't required to be registered for VAT in the UK. However, they must operate VAT MOSS. In theory just one international sale of an electronic service to a non-business consumer in another EU country brings the business within the VAT MOSS reporting regime. 
  
HMRC say they have analysed the VAT MOSS returns submitted so far. From this incomplete data HMRC have concluded that some people registered for VAT MOSS may not be in business. A person who is not “in business” doesn't have to register for VAT MOSS as the supplies are not made in the course of a business. Problem solved!    
  
No, the problem is not solved. HMRC can't accurately determine whether a trader is “in business” from three VAT MOSS returns, but they are writing to those people they believe aren't “in business” suggesting the trader should deregister from VAT MOSS. If your client receives such a letter he will be confused, as HMRC is constantly telling people to declare all of their income for tax purposes. 
  
If you have advised your client to register for VAT MOSS, you will have already reviewed whether he is in business or not, and concluded that he is. If the international sales are merely part of a “hobby” and not part of a business, then you wouldn't have advised the individual to register for VAT MOSS. 
  
For those small traders who decide to stay registered with VAT MOSS, a further concession is offered: they only have to retain one piece of evidence of where their customer is located. However, the trade needs to abide by the VAT laws of the country he is selling into. A concession applied by HMRC won't necessarily be recognised by another EU tax authority.


This is an extract from our topical tax tips newsletter dated 14 January 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>