UPDATE: Discussions with HM Treasury / HMRC have led us to realise that the kind of meaningful changes to the legislation that we are asking for need to come from Brussels - so we have started an EU-wide petition calling on Pierre Moscovici to implement a unilateral suspension of the new EU VAT laws for all micro businesses and sole traders.
Please come over and sign the EU-wide petition at: https://www.change.org/p/pierre-moscovici-a-unilateral-suspension-of-the-introduction-of-the-new-eu-vat-laws-for-micro-businesses-and-sole-traders
BACKGROUND: The first wave of new EU VAT regulations coming into force in Jan 2015 mean that micro-businesses supplying digital services (such as Ebooks, music downloads, apps, guides and courses) direct to customers (B2C) will have to charge VAT based on the location of the customer who buys their product rather than the location of their business. With the intention being to extend this to all goods and services from as early as next year.
This may sound like a simple change on the face of it but, make no mistake, this has brought corporate levels of regulation and administration not just to the Boardrooms, but also to the kitchen tables of sole-traders. The new legislation was agreed and brought into force based on incorrect assumptions as to the extent of their effect on the EU’s smallest businesses. In reality it is crippling and impossible to comply with. Hundreds of thousands of the smallest businesses have been faced with a stark choice as of 1st Jan – either to close their cherished businesses or to break the law. That is not a reasonable situation to put them in.
Here in the UK, our campaign has gained a number of concessions from HMRC and HM Treasury. Whereby those in the UK can keep their VAT threshold for UK sales and use the information provided by your payment processor (PayPal or equivalent) as your evidence for proof of place of supply until the end of June, which are huge wins for the campaign; however, this does not fix all the problems with the legislation, nor does it fix the problems for those businesses outside the UK.
As such, we have not shifted the focus of the campaign to obtaining a unilateral suspension of the new EU VAT laws for all micro businesses and sole traders. Please come and sign the new petition here: https://www.change.org/p/pierre-moscovici-a-unilateral-suspension-of-the-introduction-of-the-new-eu-vat-laws-for-micro-businesses-and-sole-traders
PLEASE SIGN THIS PETITION to call for VINCE CABLE to intervene and uphold the existing VAT Exemption Threshold for businesses supplying digital products.
The new EU VAT regulations coming into force in Jan 2015 mean that micro-businesses supplying digital services (such as Ebooks, music downloads, apps, guides and courses) direct to customers (B2C) will forfeit their VAT exemption threshold by doing digital business in Europe. Why should small digital businesses be treated differently to other categories of small business in the UK?
This new legislation will cripple, and potentially force into closure, thousands of micro-businesses across the UK – just as this government claims to be trying to make it easier for small businesses to grow and create jobs. Even the Head of Tax at the Institute of Chartered Accountants (England & Wales) is saying that micro digital businesses should consider the option of not selling in Europe as a result of this law!
From 1 Jan 2015, the new ruling means that should you make a sale to the EU (how one can prevent that with online services is not clear) from the first £1 of revenue your business earns you will need to be VAT registered in the UK and under the VAT MOSS Europe-wide scheme – meaning that you will immediately have to apply VAT to all your services, including those in the UK.
Furthermore, this this means a quarterly obligation to submit VAT returns, increasing the accounting burden significantly; as well as, the cost and complexity involved with meeting the letter of the law regarding the capture and retention of evidence of its customers’ location will bring (which needs to be retained for 10 years).