Over the days leading up to Christmas well be revealing one juicy morsel of small business reading every day
Behind today’s door is an exciting fact about the impact that supporters of micro firms can have.
More than 23, 000 people signed a petition created at the end of 2014 calling for the UK government to uphold micro firm VAT exemptions following controversial EU-wide changes and contributed to HMRC’s tweaking of the policy to help small firms.
The European regulations which came into force in January 2015 mandated that companies selling in the economic area would have to pay VAT based on where goods were purchased from rather than where sellers were located.
For small British firms selling in the EU, this involved registering for UK VAT in order to sign up to the EU’s MinI One Stop Shop? (VAT MOSS). But in response to the protests, HMRC upheld the pre-existing VAT exemption for UK micro firms on British sales, even for firms which had registered for the tax to comply with the new requirements.
“Businesses below the current VAT registration threshold that can separate their sales to UK customers from sales to EU customers can voluntarily register the cross border element of the business, and then use that registration number to register for MOSS. This means that domestic sales will remain VAT free, said an HMRC spokesperson.
The new rules about were introduced by the EU in response to complaints that big companies including Amazon were able to undercut competitors by locating in Luxemburg where VAT on some digital products is as low as three per cent.
An estimated 200, 000 UK micro firms had to register for VAT in 2015 because of the changes but it was agreed at a summit in Dublin in September that the European Commission would propose an EU-wide VAT exemption for small firms.
Come back tomorrow for the final installment of our small business advent calendar
