HMRCFrom January 1st 2015, we will be changing the way we charge VAT. Currently, if you are a customer inside the EU then VAT is charged at the 20% UK rate. As from January 1st 2015, VAT will be charged at the rate applicable in the EU country you are located in.

For example, currently when we sell a web service to a customer in Italy we charge them the UK VAT rate of 20%. However, as of January 1st, we will need to charge the Italian VAT rate of 22%. This money then goes to the Italian government instead of the British one. (For more information about HMRC VAT payments please see reference links at the bottom of this email)

As before, if you are a business that is within the EU that has a VAT registration number, but outside the UK no VAT will be applied to your invoices as you must account for the tax through the reverse charge mechanism. This is already in place and always been the case.

What is the point of all this you might be asking? Well, according to Andrew Webb, Senior VAT Policy Manager at HM Revenue & Customs, it is the “final change in a series of changes to embed the idea that with consumption taxes, such as VAT, the place where the tax is paid is the place where the service or goods is enjoyed, consumed or used”. Or, in other words, it’s trying to make it fairer for everyone by creating a level playing field and removing the current competitive advantage gained by companies based in an EU country with a lower rate of VAT.

If you are an EU based customer of ours who currently pays VAT at the UK rate of 20%, you may find your next and all future invoices have a different total amount due. This could be higher or lower, depending upon your country, and if you currently pay by PayPal Subscription, this will require manual intervention in order to ensure you are paying the correct new amount. If you know this will affect you, we would recommend cancelling and creating a new PayPal subscription from the next invoice we issue to avoid any overpayments or interuptions in service.

Just a reminder this does not apply to customers outside of the EU – only EU based customers.

There is a huge wealth of information available out there on the internet about the up coming changes. Below are some useful links:

UK HMRC Guidance on Supplying Digital Services:

How to Register for and Use the VAT Mini One Stop Shop (MOSS) – If you are a UK Business:

EU Commission Information:

VAT Rates by Country:

If you have any questions please feel free to contact our sales or billing team:

Thank you for your time and hope you have a wonderful New Years.

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