Further to my articles on cryptoassets and Bitcoin HMRC have published an updated Cryptoassets Manual CRYPTO40000 which sets out its interpretation of trading in cryptocurrencies.
It covers:
Any business dealing in any way with cryptoassets needs to understand the VAT and other tax implications of services to, and by it.
I been asked many times about the VAT position of UK residents buying goods online (and also by more traditional methods) so I thought a brief overview would be helpful.
It has been reported in the media that some overseas retailers have stopped selling to UK customers. This is a commercial decision and is not necessarily solely due to Brexit (although, clearly that hasn’t helped).
What has changed?
Pre Brexit, under the Distance Selling rules, VAT at the rate applicable in the seller’s country would be chargeable by overseas suppliers to UK recipients. This was in the same way as a domestic sale. There were then thresholds which, when breached, resulted in the seller registering in the customer’s country, but these were rarely exceeded by small or SME businesses. The Distance Selling rules still apply to EU Member States, but not the UK.
As the UK is now a ”third country” sales to the UK from the EU which were previously intra-community sales are now imports. From 1 January 2021, sellers of goods B2C (to UK individuals) with a value below £135 – so called low value consignments are required to VAT register in the UK – more details here. Clearly, many businesses are loath to do this hence their refusal to sell to UK customers. This change is not a result of Brexit but was a measure to level the playing field between EU and non-EU supplies (the latter often escaping the tax completely). From 1 July 2021 similar rules will apply to UK businesses selling to individuals in the EU, although there is likely to be a simplification measure; the so-called One Stop Shop (OSS).
Additionally, UK customers are usually responsible for the new post-Brexit import of goods, so there may be unexpected new VAT, duty and courier costs when buying certain goods from EU countries. This is similar to buying goods from any other country in the world.
It would appear that there will be a reduction in cross-border trade (in both directions) with the UK, and that is without factoring in shipping issues and delays at new borders.
Further to the history of objection to reduce rating e-publications, and the 2020 budget announcement which stated that e-publications will be zero rated from 1 December 2020, the Chancellor of the Exchequer has today announced that this date is brought forward and zero rating will now apply from 1 May 2020 – which is of course tomorrow.
Further details of the measure here.
Zero rating
This brings electronically supplied sales in line with traditional printed matter. The zero rate will apply to:
What supplied electronically means
The term ‘supplied electronically’ is not defined in legislation. It falls to be interpreted in accordance with its generally accepted meaning and includes supplies made over the internet and by e-mail.
Excluded items
Items that are not entitled to the VAT zero rate:
If more than half of an e-publication is devoted to advertising, audio or video content, its supply will remain standard rated for VAT purposes.
The zero rating extension only applies to the supply of electronic versions of books already zero rated in UK law. As such, zero-rating is limited to electronic versions of books that can be read or looked at. Supplies of audiobooks remain taxable at the standard rate whether supplied in a physical or digital format.
e-book readers are one form of hardware to which e-books can be downloaded before being read but are not in themselves e-books. Therefore, supplies of e-book readers are standard rated
Software, eg: an app is used to access e-publications but is not in itself an e-publication. Therefore, supplies of such software are standard rated.
Lending of electronic publications
The lending of any of the zero rated e-publications for a charge (for example, by a library) is zero rated.
Summary
Although welcome, as zero rating is VAT nirvana, the short lead in time could catch out some business which make such online supplies. Businesses which provide e-publications may want to consider making a retrospective claim as a result of the News Corp case.
HMRC has published guidance on how to account for digital sales to EU customers when the UK’s MOSS system becomes redundant. Full document here.
After Brexit, businesses will no longer be able to use the Mini One Stop Shop (MOSS) to declare sales and pay VAT due in EU Member States.
The final return period for MOSS will be the period ending 31 December 2019.
A business will be able to use MOSS to:
For sales made after Brexit, a business will need to register for either:
Registration deadline
A business will need to register by the 10th day of the month following its first sale to an EU customer after Brexit.
A business cannot register before Brexit.
The EC website may be used to:
Further details are provided in the HMRC guidance.
The above assumes that the UK will leave the EU, and that there will be no agreements on VAT before Brexit
What are digital services?
These include:
This means transmission of signals of any nature by wire, optical, electromagnetic or other system and includes:
These rules only apply to e-services that you supply electronically and includes things like: