If you sell digital services to end-users in the UK, then you will most likely need to register for VAT in the UK from 1 January 2021.
You will not be able to use the MOSS-report to report and pay VAT on digital services sold in the UK. Instead, you will need to prepare and submit a UK VAT return with HMRC.
As you know, the UK has left the European Union in January 2020. At the same time, during the transitional period, the UK remains a part of the single market. So, the UK remains a part of the EU from the VAT point of view.
This transitional period ends on 31 December 2020. From 1 January 2021, you will need to obtain a UK VAT registration if you sell digital services in the UK. It will no longer be possible to use the MOSS-report to report digital services sales in the UK.
Please note that from 1 January 2021, the registration threshold of EUR 10,000 will also cease to apply. If you sell digital services to end-users in the UK, you must register for VAT literally from the first pound in sales.
Once registered, you will need to submit a UK VAT return and pay UK VAT to HMRC every quarter. VAT returns are generally submitted quarterly by the last day of the month following the end of the return period.
How to register for VAT in the UK
You need to apply for registration with HMRC and wait for the UK VAT ID. Important: The registration process takes up to 30 business days, so I recommend not to postpone the registration until the last moment!
Digital service merchants in the UK can register themselves online or by regular mail. Need help with the UK VAT registration? Drop me a line.
What happens if you do not register on time
First, the HMRC has the power to fine you for late registration. The penalty can range from 5% to 15% of the VAT amount for the overdue period.
Secondly, you are not allowed to collect VAT from users to whom you sell digital services or show the VAT amount on the invoice until you receive a UK VAT number. However, you will still have to pay VAT to the tax office for this period.
UK MOSS registration will stop working from 2021
And last but not least, if your business is not located in Europe and you used the UK MOSS (also known as the non-union MOSS scheme), you will need to transfer your registration to one of the EU countries.
Please note, starting from Q1 2021 you will NOT be able to submit a MOSS-report in the UK.