Tax & admin · 15 September 2015

EU to propose VAT exemption for micro firms, but businesses want interim suspension

The European commission said it would propose a threshold to exempt smaller firms from the VAT MOSS rules
The European commission said it would propose a threshold to exempt smaller firms from the VAT MOSS rules
VAT regulations which were introduced at the start of the year could be changed, following a recent EU summit in Dublin. The European commission said it would propose a threshold to exempt smaller firms from the VAT MinI One Stop Shop (VAT MOSS) rules.

The change had meant VAT would now be charged in the country where the products were bought, as opposed to the country where the seller is located significantly affecting the way sellers of digital services deal with VAT when selling to other countries in Europe.

The aim was to prevent large companies avoiding higher VAT rates by saying they were based in countries like Luxembourg, where rates are lower. Smaller firms however, have said the effect it has had on their business has been detrimental and had been protesting the change since late 2014.

UK businesses were exempt from paying VAT if they sold under 81, 000 worth of products a year, but this was removed for those exporting digital products and services to Europe at the turn of the year.

Lorraine Dallmeier, who runs an online skincare school?set up a Twitter protest, stating the legislators hadn’t fully thought through the implications for micro firms. She said firms had three options register to pay VAT in every EU member state they sold to, register for the VAT MOSS scheme, or stop selling to the EU altogether.

Some smaller businesses said they had to stop trading in Europe since the change in policy Clare Josa Mentor, which sells online courses and ebooks, now only sells within the UK because of it. The owner told the Guardian micro firms were having difficulty meeting the data requirements of the EU law, with firms needing at least two pieces of non-contradictory information proving to audit standards where a sale was made.

She said: I’d have to know where someone is before I sell to them if I am to display the correct price. You also need to ask customers to fill in extra fields which leads to basket abandonment.

Josa added that legislation targeting corporations is hitting kitchen tables in the UK. Her campaign group EU VAT Action has been protesting about the law and attended the EU Fiscalis event, where finance ministers said small businesses should be exempt from the policy.

The time this would take to come into play though, could prove even more harmful to smaller businesses’ survival rates, according to Josa. The legislation will not be debated until the end of next year and it could be two or three years more before it comes in, she said. Meanwhile businesses are not trading in Europe or in some cases even starting up.


 
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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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