New SI covers covers what happens to VATMOSS, VAT and supply of digital services post-Brexit
The purpose of the Order is to make provision to repeal the changes which came into effect on 1 January 2019 in relation to the place of supply of digital services, for example phone apps, e-books or music downloads. These rules determine where VAT is due. VAT on these services supplied in the EU can be accounted for under a simplified procedure called the VAT Mini One Stop Shop (VAT MOSS). If there is no deal, VAT MOSS will no longer apply as it is an EU scheme. The Taxation (Cross-border Trade) Act 2018 (TCTA) contains provisions to repeal the relevant primary legislation and there will be no reason to retain the changes brought into effect in January once the MOSS scheme no longer operates.
The Order is made under section 7A(6)(b) of the Valued Added Tax Act 1994 and section 52 of the Taxation (Cross-border Trade) Act 2018 due to the withdrawal of the UK from the EU. It is to come into force on such day as the Treasury by regulations appoint. It addresses failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU.
Article 3 amends paragraph 15 of Part 3 of Schedule 4A to the Value Added Tax Act 1994. Paragraph 15 provides a special rule to determine the place of supply of electronically supplied services, telecommunication and broadcasting services to a person who is not a relevant business person. It also provides an exception to the special rule where the supplier is established in only one member state of the EU and makes supplies below a specified value. Article 3 removes the exception to the special rule.
Article 4 revokes the Value Added Tax (Place of Supply of Services) (Supplies of Electronic, Telecommunication and Broadcasting Services) Order 2018 SI 2018/1194 which introduced the exception to the special rule.
An explanatory memorandum has been published.