UK to earn £2 billion over 5 years on EU digital VAT reforms

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The UK is set to earn an additional £2 billion in VAT receipts between 2015 and 2019 following the implementation of new EU rules on the sale of digital downloads, games, Apps, videos, internet telephony and e-books to consumers.

EU reforms VAT on digital downloads

The new regime, which will come into force on 1 January 2015, impacts how countries can tax cross-border EU sales of telecommunications, broadcasting and e-services. The change in ruling switches the place of taxation from where the provider is located, to where the consumer is resident and will drive a sharp rise in tax take for the UK and other major EU states.

Fresh tax reporting burden for UK businesses

The measures will however, create a fresh tax reporting burden for UK digital businesses providing these supplies, as they will no longer be able to simply charge UK VAT and report through their standard quarterly VAT return.  Instead they will have to adapt to a new filing regime (Mini One Stop Shop – MOSS) which will enable them to declare sales across Europe. They will also be required to record the location of a customer, and charge the appropriate local VAT rate putting a considerable burden on small developers of Apps and games.

Richard Asquith, head of tax, TMF Group commented:

"These measures have been on the table for quite some time with their implementation originally proposed by several EU states in 2010.  Whilst the additional tax revenues will be welcomed by HMRC, these benefits need to be weighed against the potential impact on small business with around 30,000 needing to re-think their EU VAT reporting."

View more information on other countries, or find out more about VAT.

 
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