How to Do Bookkeeping for VAT MOSS Businesses

18th July 2019

Are you looking for how to manage VAT MOSS for your business? We are providing the best services at the best rates! Are you confused with what is this VAT MOSS? How will you manage this all? Will it affect your business? Don’t worry at all!  

You’ve come to the perfect place. We’ll be answering all your questions about VAT MOSS bookkeeping.  

 Following are a range of questions that will answer your questions about how to do bookkeeping for VAT MOSS companies.  

Never heard what VAT MOSS means? We answer all your queries.  

What It Means!  

The VAT Mini One Stop Shop is a service that allows your business to pay VAT if you provide digital services to clients in other EU countries. The digital services that you provide to various companies do not have VAT charged on it.  

As a result of a law change that came into effect as of January 1, 2015. Your business now has to pay VAT based on the nation where the consumer has purchased the service, not the country where your business is settled in.  

It was presented in the UK so that suppliers could pay the VAT to the HMRC, rather than registering to pay VAT in each EU state.  

How do you register for VAT MOSS?  

The first step is to get your business registered for the UK VAT. Once that step is completed, you will need to include VAT MOSS in your HMRC account.  

It is essential to set up for VAT MOSS in ten days after you have made your first digital sale to someone who is not from the United Kingdom. Once you have this all set up, you need to complete your payments for VAT MOSS quarterly by the subsequent dates:  

  • April 20 for the quarter ending March 31  
  • July 20 for the quarter ending June 30  
  • October 20 for the quarter ending September 30  
  • January 20 for the quarter ending December 31  

It is a complex process which is rather challenging to maintain for small businesses. The government’s website also provides more details regarding VAT MOSS.  

We at Pearl help you with all this, so don’t sweat, we have got you covered!  

The Math Jargon  

How do you work out the VAT component?  

In case your business is demanding from customers a flat rate VAT adjusted price, that is the ”Gross Price” then your calculation should be based on knowing what percentage of that price is VAT. This will allow you to complete your VAT MOSS Return. An illustration of this for the VAT MOSS accountant is provided below.  

For instance, your business is providing social media management or eBooks, and you are demanding 10 GBP from all your consumers. This price is inclusive of VAT and irrespective of where the customer is settled in. The total proportion of the VAT in that price (10 GBP) will differentiate. This will depend on the rate of the value-added tax of the country where the consumer is purchasing your service.  

Thus, to be able to calculate the VAT, a business should use what is called the VAT Fraction for each nation. The formula is to divide your total sales revenue by the VAT Fraction of the country. The resulting numeric is the amount of VAT that should be adjusted within your sales and further bookkeeping.  

This is how the VAT Fraction can be calculated:  

(100 + VAT rate) ÷ VAT rate = VAT fraction  

Let us take the example of Sweden. The VAT rate is twenty-five per cent (25%); thus, the VAT Fraction would be:  

(100+25)/25 = 5  

Hence, if you perhaps sell off 12 Ebooks costing 10 GBP to consumers in Sweden where we know the VAT rate is 25%. The total value of your sales would be 120 GBP, and the total VAT would be 120 GBP divided by, which is equal to 24 GBP.  

As we know the VAT is 24 GBP, thus the price not containing the VAT that is the net value of sales would be:  

120 GBP – 24 GBP= 96 GBP.  

As a result of this calculation, we know what amount we have to pay for the VAT MOSS. You can find different VAT fractions of various countries with the European Commission. They have published the current and previous VAT Rates for each member of the European Union.  

If this seems difficult to comprehend, don’t worry at all. Pearl Accounting is here to help you do all this. You won’t have to fret or panic over anything! At competitive rates, we have got you covered.  

You can also look at HMRC’s VAT on sales of digital services in the European Union to discover the changes made in the UK and other European ‘nations’ VAT rates. You should also keep up with the European Commission if the VAT rate of a nation from the European Union has any variations within the tax dates. In case of this, you should in your books consider the sales for both the old and new charges on distinct lines of your VAT MOSS Return. Adjustment to VAT MOSS from January 1, 2019.  

As of the year 2019, if a business sold less than 8,818 GBP total of digital services to customers in the European Union in 2018 and the firm does not expect to sell more than this amount in the year 2019, moreover, the company does not have a customer base in the EU, then there is no need to charge the local VAT – the business can charge the rate of UK VAT in its place. In case your sales are lower than GBP 85,000 a year, then the business can merely de-register for VAT and not levy the clients with any form of VAT.  

HMRC have more guidance on this topic.  

The Exchange Rate in your Books  

You can use QuickBooks to help you out with this. This is in case your customers (Non -UK Based) are paying in a currency other than the pound sterling, and you must show that currency in your business accounts, it is essential that when you are calculating the sale on your quarterly return, you convert the said currency to the pound sterling.  

It is significant to use the conversion rates provided by the European Central Bank. These are provided on the last working day of each calendar quarter for this purpose. Look at this to see which exchange rates apply for the current year and earlier years.  

However, if you are already converting the foreign money in pounds sterling in your business accounts based on either a daily or periodic rate, these amounts from your accounts can be then used to complete your quarterly VAT MOSS Return.  

Leave it to us to do all this! All of us here at Pearl Accounting is here to help you through all this process.  

Going Outside The Boundaries!  

How to Record a Non-European Union VAT MOSS Return?  

Sounds complicated? It’s not at all! The best thing is you don’t have to be bothered about this! As Pearl Accounting is here for all your needs!  

This is for companies who are not registered in any of the countries of the European Union. They should use this return to declare VAT on the sales of digital services to customers in the Union. This is inclusive of the purchases made to UK clients.  

To submit the Non-Union Return, a business can choose one of these options:  

The VAT MOSS: Non-Union Return guide found on the government’s site tells you how to figure this out in-depth.  

Your role is to send HMRC a Non-Union VAT MOSS Return of your qualifying sales and sum of each quarter if your business is made part of the whole arrangement.  

HMRC will then send the applicable fragments of your tax return and reimbursement to the known authority dealing with taxes of the nation where the clientele is settled in or are making their purchase from.  

As of January 1, 2019, any company that is found beyond the territories of the European Union and are selling digital services to EU customers may register for the Non-Union program even if they are involved for VAT in the Union for further purposes.  

You may still need to be registered for VAT as a non-established taxable person (NETP) and send a separate return if you have non-qualifying sales.  

This is how a VAT MOSS accountant can figure out and keep records of this form of tax levied on selling digital services in the European Union.  

We are here to help you through all this process, so don’t fret and contact us at Pearl Accounting!  

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