Plans outlined to amend tax rules to enable new simplified reporting of VAT owed for supply of digital services

The planned changes to the UK's VAT Regulations are contained in a consultation paper HMRC has launched and are designed to account for a new VAT mini one stop shop' (VAT MOSS) portal that HMRC has developed in response to changes to the way the tax system will operate from 1 January 2015.

Under the rule changes, the supply of broadcasting, telecommunications and electronically supplied services by businesses to consumers will be subject to VAT in the country where the individual lives. Under current EU law, supplies of services to individuals or non-business recipients are generally subject to VAT in the country where the supplier is located.

The changes are laid out under the new EU VAT Directive which member states must implement before the end of 2014. Guidance on the changes was published earlier this year.

The VAT MOSS system has been developed to allow businesses to submit their VAT returns relevant to their supply of digital services to consumers in the EU in one place, rather than having to use a number of different systems in operation around the EU for paying the tax they owe.

HMRC said that its proposed amendments to the VAT Regulations are intended to plug gaps in existing UK tax laws where those laws do not account for VAT submissions through the VAT MOSS system.

Among other things, the proposals will enable businesses to make claims for overpayment of VAT made through the VAT MOSS system and will also permit businesses to claim "bad debt relief" on the VAT they owe for UK supplies of digital services when making the payments through the VAT MOSS system, it said.

HMRC's consultation ends on 26 August.