Operators of platforms through which e-services are supplied to private consumers need to plan ahead for the new VAT rules from 1 January 2015.
As previous articles have highlighted, new EU-wide VAT rules will change the way that suppliers of broadcasting, telecoms and e-services (BTE services) such as music downloads and e-books charge VAT on those services when supplied to private customers (B2C supplies). In future, VAT must be charged according to the location of the customer, rather than the location of the supplier.
But what about situations where services are provided via intermediaries? “Where the sale is viewed as being made by the intermediary, rather than the seller of the digital services, the rule changes will have a significant effect for the intermediary,” says Robert Facer, a Moore Stephens VAT specialist.
It will therefore be important to establish whether the intermediary is deemed to be making the supply to the end customer. According to HMRC, where the platform operator sets the general terms and conditions, authorises payment or delivery, or does not clearly state the name of the supplier on the receipt or invoice issued to the consumer, then the platform operator is seen as making the B2C supply – even if contractually they are only an agent.
Under the UK’s current rules, intermediaries may have a choice of VAT treatment, i.e. agent or principal.
“With effect from 1 January 2015, this UK option will no longer be available where a platform sells in its own name,” Robert says. “The standard EU rule for intermediaries will always apply.” This means that the digital content provider will make a sale to the platform operator and charge VAT (as appropriate); the platform operator will then supply the end consumers and charge them VAT. “The platform businesses will need to find out where the consumers of the services are based at the time of supply and charge VAT on their supplies at the appropriate rate,” Robert says. “They will then need to recover VAT on the sales to them by the originators of the BTE services being provided.”
The need to charge the end consumers VAT and at the rate determined by their location will clearly be a big change. “For platform operators currently selling in their own name, it may be worth examining their business model to manage the impact of the new rules,” Robert says. “However, for suppliers of BTE services whose platform operators do not currently sell in their own name, it may be worth looking for alternative providers who will take on the responsibility of the new VAT rules. Otherwise those BTE service suppliers will themselves be responsible for applying the new VAT treatment for sales to customers.”
ContactsUK VAT team
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