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VAT for Digital Businesses

The Issue

In January 2015 a rule change came into force for UK businesses supplying digital services to customers living in other EU states.

E-services include:

  • E-books and e-magazines
  • Online courses
  • Broadcasting (Radio or TV programmes)
  • Telecommunications
  • Video-on-demand
  • Apps

Along with all EU businesses, UK companies are now liable to pay VAT at the rate of the country where the customer is based for e-services. This clamps down on large companies avoiding tax, by moving their business to countries where VAT is lowest. Small businesses here can choose to sign up to HMRC’s new MOSS system, use an online platform, or contact countries directly to identify what VAT to pay.

Action FSB have taken 

  • We engaged with HMRC to ensure small businesses understand the VAT changes and the options they can use to pay VAT.
  • We’re ensuring micro-businesses (which often excel at exporting e-services) are aware of the changes. Those with a turnover of under £82,000 would not have previously been VAT registered in the UK.
  • It’s likely paying VAT at the rate of the country where the customer is will be extended to all online goods. We’re engaging with HMRC to ensure the changes don’t put barriers to exporting on small businesses.

Our Ask

We want small businesses here to benefit from a fair European market. While clamping down on tax avoidance by larger, often multi-national companies, it’s vital e-service providers are not hit by a complicated and over-bureaucratic VAT system. We welcome the opportunity for small businesses to register with the VAT MOSS system for 28 countries in one go.

Achievements in...



  • We successfully lobbied for requirements on small businesses to be deferred by six months. This allows them time to set up an online process to handle VAT.
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Related Links

Visit the VATguidance site