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VAT Business Brief on 1 Jan 2015 Changes: Rules Changed for Smaller Businesses & update

With the changes just weeks away, HMRC have today issued a Business Brief to explain a last-minute rule change, as well as remind businesses affected by the changes.

The confirmation of a recent “fix” for those micro-business trading below the £81,000 VAT registration threshold is welcome news.

MOSS VAT registration is required for sales of digital services to private customers in other EU countries, which would unfairly penalise UK businesses who thought they were covered in the UK by the £81,000 threshold before they needed to charge UK customers UK VAT. 

However, thankfully, HMRC have now accepted that such businesses can keep the protection of their £81,000 UK VAT threshold, even after registering for MOSS. 

They will have to submit UK VAT returns, but these will be nil as they won’t need to charge UK VAT to UK customers until sales increase in future.

VAT Recovery

By the same token, such businesses cannot reclaim VAT on costs relating to UK sales, but interestingly, they will be able to reclaim UK VAT on costs that relate to their EU sales. 

The costs associated with, say, a server used to make sales in both the UK and EU will be partly recoverable, depending on the split of sales. 

This could be a welcome shot in the arm for smaller businesses and it might be worth reviewing purchases, invoices & receipts with a view to making a claim.

Any EU VAT suffered on costs in another EU country may also be eligible for reclaim (including business travel) and this may be worth reviewing.


HMRC also summarised what types of services will and will not be caught by the rules, provided a summary of customer verification rules and documentation retention obligations as well as practical tips and links to help with registering and compliance.

There has been a veritable avalanche of guidance on the new rules and HMRC state that they are reviewing this with a view to collating it all into new guidance to be issued in due course. 

Those affected however, should act now and not delay.




Date: 11th December, 2014
Author: Richard Collier


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