Friday, 2 January 2015

Uphold the VAT Exemption Threshold for businesses supplying digital products

I feel the same way about on-line petitions as I feel about Patrick Harvey: they might do a great deal of good but I don't trust them. In the case of Patrick Harvey, it isn't that I don't think he's a lovely guy and a passionate advocate of the good (he's all of that), but that a cult of personality can easily form around any politician who isn't a greedy, duplicitous scum-sucker (hello, Tony Benn). For petitions, I reckon they are data collection traps, and signing one will lead to emails from Nigerian women looking for their one true love or Russell Brand.

However, I kind of support this campaign, so I am raising awareness by cutting and pasting the details of the petition site. Without accrediting the writer, because I am a member of the KLF and love to live dangerously. Enjoy.

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).

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