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VAT MOSS - Does it need to be excluded from the Income tax?


I’ve a question regarding the VAT MOSS and paying taxes as a sole-trader through a Self Assesment.

The VAT MOSS threshold is £8,818. If I surpass that, then does the amount that is taxable for EU VAT, should then be excluded from the income tax?

For example:
In a year my business earns £80,000. Out of those, £15,000 are from EU-based customers. So If I pay the taxes for this 15K under the VAT MOSS scheme, will my income tax will still be £80,000, or will it be deducted to £65,000 because I’ve paid the tax under the MOSS?

Basically I’m trying to understand if the VAT MOSS is an extra tax burden since I’m paying for the EU sales both in the Personal Income and also to other EU countries, or not.

If someone can share an insight on this, it’d be very helpful.

Thank you

They’re different types of taxes. The VAT (MOSS or otherwise) isn’t a tax you’re paying yourself, it’s more a tax you collect from your customers on HMRC’s behalf - you add VAT on top of your retail prices, charge that to the customer, then hand it over to the tax man, the VAT was never your money to start with. If that £15,000 figure is the total including VAT then your business only actually earned about £12,500 (or whatever is left when you deduct the various different countries’ VAT from the relevant sales).

That £12,500 ex-VAT net sales are part of your income, and will count towards your turnover when calculating how much income tax and class 4 NI you have to pay.

Hi Ian, thank you for the detailed reply. With the products that I sell, I simply charge a fixed price for the customers and they don’t see the VAT aspect of the sale. The prices are always including VAT.

I understand what you say that it’s not mine to begin with. However, since the MOSS threshold is £8,818 then if you sell below that threshold, then the business is treated as a UK sale and should be charged the UK VAT rate. But since I’m not VAT registered as I haven’t passed the 85K threshold, then I wouldn’t have to charge VAT at all. Only when I pass the VAT MOSS threshold of 8818 then I have to charge, and pay the VAT under that scheme.

That sounds correct to me. When MOSS first started there was no lower threshold - any relevant sales meant you had to register for MOSS and charge local VAT in each country. Subsequently they changed it so that below €10,000 you could just use your home country rules (and charge the same VAT - possibly none - as you do on domestic sales).

Once you do hit the €10,000 threshold then you would have to use MOSS and treat your EU sales as including VAT at the relevant country rate, but you would also be entitled to reclaim any UK VAT you incurred on purchases related to those EU sales, which may offset some of the cost. But you can’t claim back the VAT on purchases related to your UK sales unless you voluntarily started charging VAT on those sales too.

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