Tamebay talks VAT MOSS with the European Commission #vatmoss
On Thursday I attended a frustrating media briefing at the EU Commission building in London regarding the impending introduction of VAT MOSS: we’ve written about this before.
In brief, anyone who sells automatic downloads online (such as music, apps, ebooks and the like) will face a whole new VAT regime that is both onerous and deterring. If you sell to other countries in the EU you’ll need to register with the HMRC’s VAT MOSS service, keep data about who you sell to and start paying VAT to HMRC from 1st January even if your sales fall below the current UK Threshold of £81k. And the VAT paid will be at the prevailing rates in the locale of the buyer, not those set by HM Government.
The meeting I attended was a media briefing (and not a lobbying exercise) and unfortunately I cannot name or attribute any comments to the various officials. But suffice to say those from the EU and HMRC were there to sell the benefits of this change. They were keen to remind us that:
– It will raise some cash for our national coffers. Maybe £1bn for the UK over three years.
– It levels the playing field for SMEs across the EU. (Although is clearly detrimental to those in the UK.)
– It’s an easy bit of regulation to comply with.
I was alarmed by several comments from the European Commission attendees who had come over from Brussels to talk VAT MOSS up. Firstly, they argued that collecting two pieces of data (to confirm the location of the buyer) to comply with VAT Moss was straight forward. I disagree with that and consider it both non-trivial and time-consuming.
Secondly, the EU Commission attendees from Brussels were clear that, in an ideal world, the VAT MOSS rules should apply to even physical goods sold from the UK. Let’s be clear what that would mean: UK sales made to buyers in an EU member state should be taxed on a similar basis and VAT, as a matter of principle, should be charged at the local VAT rate of the buyer not the seller.
That would have a huge impact on the hundreds of thousands of UK ecommerce sellers who sell within the EU were it to come into force.
On a positive note, I do think that the HMRC attendees there understood that compliance does represent an administrative challenge and they want to smooth that out. The actual interface of the HMRC VAT MOSS dashboard will be critical there and it hasn’t yet launched. We will be interested to see if it is as easy to use as HMRC claim.
But the crux of the matter is twofold. This is a measure that will stifle many thousands of small businesses and kitchen table start-ups in the UK and it will discourage cross-border trade within the EU by UK sellers of download items. It’s punitive ‘red tape’.
Let’s be very clear on Tamebay’s stance here:
– The VAT threshold for SME sellers should stand for digital goods as it stands for physical sales. If you sell less than £81k, you should have the choice to continue selling within the EU on the same basis as sellers of physical goods under that threshold.
– The HMRC should delay implementation of VAT MOSS until the dashboard is up and ready and proper lobbying against this change has had the opportunity to take its course.
To make a personal observation, I was surprised by the attitude of the EU Commission people at this meeting. There was a sense that those who spoke out against it (as I did) might somehow simply misunderstand the situation or be maybe be ill-informed. I don’t consider myself to be either in this case.
Emma Jones from Enterprise Nation has been using her government/Conservative connections to talk to those in Brussels, as she reported yesterday on the EN blog.
My key impression from the EU Commission people I met is that there is only a slim chance of making VAT MOSS as it stands fairer for SMEs in the UK who sell digital products. Not least because they wish to extend it to physical goods if they can in due course.
Wedge. Thin end of.
ok I have only been been taking odds and sods in on this, as It does not concern me.
However surely as a digital media supplier you are more or less re-locatable. Just register the business in a non EU country. (hong kong sounds ok lol )
You have to pay VAT to the relevant country on EU sales wherever you are in the world. So moving wouldn’t do any good. In fact, you’ve had to to do that for quite a few years already but, just like this, very few people seem to know about it.
I know so little about VAT that I was uncertain whether to make comment or not. However I am curious and was wondering if anybody knows the answers to my question.
Any seller of physical products registered for VAT in the UK can claim back VAT on the products purchased for resale and VAT on many other business purchases. If a digital product seller is paying VAT on digital products sold within Europe but otherwise is not UK VAT registered can they then claim back VAT on UK business purchases i.e. the PC they typed their book on?
Yes you can claim the VAT back on purchase from other EU members states (if your VAT registered), just as you would on purchases from the UK. Obviously you need the VAT receipts to do this and be aware that in different EU states charge different rate eg in Germany there VAT rate is 19%.
Yup, absolutely right. One benefit of complying with VAT MOSS will be the opportunity to claim back VAT now. However, in terms of small business etc it’s not likely to be a massive boon.
I was in the same happy situation as you Glenn until a few weeks ago. I don’t turn over enough to be Vat registered and m accountant said I would be better of that way. I sell mostly to consumers so it is better for them if I don’t have to add VAT on top and I don’t purchase enough for my business for the lack of VAT to be worth the admin.
Now, I know more about VAT than I ever wanted or expected to know and will have to completely revamp my sales pages and register with a compliant platform through which I can make the sales (many are not yet compliant) because then they will handle the VAT complications for me (working out and proving where the customer comes from, working out the relevant VAT rate for them and then dealing with submitting VAT returns to HMRC).
That means a commission taken by the platform which reduces profits and another loss if I absorb the additional VAT that will have to be charged to the customer. Alternatively that cost is passed on to the customer so they end up paying more.
I know the platform commission is a fair exchange for he work they have to do, but if the EU had allowed the current distance selling thresholds to remain in place I could have remained happily ignorant about VAT and spent the time creating more products to sell.
Hi Tamebay Team,
There’s plenty going on behind closed doors and in public that is making progress. And there is still plenty that each and every one of us can do to create the changes we so desperately need.
Thank you for feeding back on the briefing.
Would you mind if we share the link for the latest update on the campaign with your readers? Please delete this comment if not!
Clare & the EU VAT Action Team
Feel free to share Clare.
Screw the HMRC and EU … Ukip please save us from this bs.
UKIP could be a huge help if they wanted to campaign on this. They have MEPs and MPs now. Sadly, I think their energies are being expensed elsewhere being rude about foreigners and women.
Here’s something from UKIP. http://www.ukip.org/eu_forces_online_smes_to_register_for_vat_from_jan_1st_2015
Their solution of getting out the EU isn’t much good on this one because the VAT MOSS rules come into force in less than two weeks.
As I don’t sell digital products this doesn’t affect me – yet. However, if they started doing this with physical goods, like I do sell, I would simply stop selling to European countries. Granted, it would knock out about 20% of my sales…..
Hey, just had a thought: does selling to the UK count as selling to Europe?
If you are below the VAT threshold you can sell to UK customers and keep that threshold. Of course I presume you’d have to be able to prove that they are all UK customers with 2 pieces of non-conflicting information.
If you start collecting two non-conflicting pieces of information about all your UK customers and saving them for 10 years then you are obliged to register with the Data Protection Agency as both a data processor and a data controller.
You’d also best hope that as the records have to be saved electronically that you never lose your laptop or if you use cloud storage that you know what you will do and how much it will cost to compensate users (such as free membership of experion for a year) and what the penalties are if/when your data is compromised.
Don’t forget companies like eBay pay gazzillions in data security and they still have problems. How much can you afford to keep the same type of data secure?
It is already affecting more than cross European border sales. USA and Australia based designers are already seeking ways to block customers from the EU from purchasing their pdf products. Plus customers, put off by all the red tape are simply opting to buy outside of the EU. So micro businesses are facing a double blow. First the difficulties in complying, secondly a very real loss of business. This is not creating a level playing field… at all.
If This goes forward to include all products and the VAT collectors stick true to their word to aggressively pursue non compliance, a lot more than micro businesses will suffer within the EU.
lets be honest
its illegal to speed or smoke weed they simply cant prosecute everyone for everything