SMEs protest against #vatmoss

The issue of the week for SMEs is surely the impending introduction of VAT MOSS. Not heard of it? It’s really only made it onto the agenda in the past week or so but might impact your business.

VAT MOSS is a new tax law that comes into power on 1st January 2015 that requires all businesses selling digital products to consumers in Europe to register for VAT. So if you’re selling anything from musical downloads, ebooks through to Apps and software, you’ll have a great deal more paperwork to tend to.

Let’s be very clear: A UK business selling ‘digital’ services will need to be aware of important VAT changes that are taking effect on 1 January 2015 if it sells these services to non-business customers who are based in the EU. UK VAT will no longer be charged on these sales – the key issue will be where the customer is based rather than the supplier.

Enterprise Nation has boiled down the problems that VAT MOSS will present:

Cost of compliance
Thousands more businesses will need to hire accountants to file quarterly VAT returns and there would be extra paperwork required with UK businesses having to determine and prove if they are selling to individuals or businesses in the EU, with the determining factor being if the other party can provide a VAT number.

Role of Marketplaces
The move is pushing more small businesses to trade via marketplaces as opposed to selling digital products via their own site, which is ironic when the move is intended to clamp down on the tax practices of the major marketplaces.

On this point, we also spoke to Patricia van der Akker of The Design Trust who has been keeping a close and alarming eye on developments:. She says:

‘HMRC says that the online platform or marketplace is responsible for charging the VAT, but the providers aren’t doing anything, and many of these marketplaces are outside of the EU anyway. Many UK businesses charge their products in US$ as the American market is so big, and go through an American market place or portal – would they still need to comply? There is a lot of confusion in this area.’

Data collection and retention
There’s also a problem with the data requirements of the rule, it possibly works against data protection practices with specific requirements of data needing to be collected and stored or 10 years.”

So what can be done?

Issy Zinaburg has started the petition here and you can read her story on Enterprise Nation.

Her petition seeks a delay and review. I have no hesitation in suggesting you sign it because these new rules are a real burden for SMEs impacted. A delay and rethink is vital and HMRC has indicated that might be an option. More than 5000 people have signed the petition already.

There is a good deal of detailed bloggery out there on the subject. Here are some choice cuts:

How #VATMOSS is the end of small enterprise in Britain – and how we can change it

New EU VAT rules change the game for digital businesses