The latest on Digital VAT

There is a campaign to get changes to the new digital VAT charge regulations that came in on January 1st 2015.  For all the latest info, see this link to the EU VAT Action blog.

As more 'guidance' from HMRC is announced, the whole thing gets more and more impossibly complicated.  I keep tweaking the information on my website pattern page, but I won't be launching any patterns until things are a bit clearer.

Right now, the requirement in the UK and some but not all other EU countries to show the sale price inclusive of VAT at all times is proving a nightmare.  I do not want to have to charge everyone the same total price, if sales to some countries like Hungary have high VAT levels (27%) while others (UK and non EU) will have zero. 

I will be watching things closely to see how this works out.

Latest on the #VATMOSS #VATMESS

Sorry that my blog posts this week are all to do with VAT on digital downloads and I haven't been posting any pictures, but if you ever buy e books, pattern pdfs, online quilt tutorials, block of the month courses etc., the new regulations will affect you - whether you buy from the UK, the EU or further afield.

There is a new EU-wide petition - please click the link in red and sign!

A unilateral suspension of the introduction of the new EU VAT laws for micro businesses and sole traders

  

I added the following comment when I signed -

 It is impossible for really small businesses, like many sole trader i.e. single person businesses, to collect and store the necessary information demanded by this new legislation, as the payment platforms we use e.g. Paypal, just don't do it. These are businesses that are so small, we can't even economically justify having our own credit/debit card processing systems, as the cost of running these, compared to our turnover online, is just too much. The need to obtain and keep this information is a major security risk for both customer and business, and the need to get the information from the customer is enough to kill a digital sale, where the customer wants the download as quickly as possible, with the least hassle. UK Businesses with a turnover of less than £81,000 do not need to register for VAT, so hundreds of thousands of tiny businesses are not, in an effort to keep our prices affordable. As HMRC in the UK only informed VAT registered businesses of this new change and did not inform the hundreds of thousands of sole traders who are not VAT registered because they fall well below the UK's VAT threshold, we only heard about the new legislation less than a month ago, via social networking sites. The most recent information issued by HMRC is still confusing as they do not seem to be able to adequately define what is a digital download.

What were the UK's MEPs doing while this legislation was being developed? Unfortunately, the UK's first party in the EU is UKIP, an anti EU party, and legislation like this merely supports their anti EU stance, by making it seem like the EU is imposing yet more impossible red tape on small UK businesses. It adds fuel to UKIP and other Eurosceptics in the British government who would like to push the UK out of the EU and will only draw more voters over to their side if, as promised by the current government, the UK holds a referendum on its membership of the EU in 2017.

The introduction of this new legislation on January 1st does not give small, non VAT registered businesses enough time to comply, payment platforms like Paypal are not geared up for it and many micro/nano businesses are simply going to shut down the digital parts of their businesses rather than risk failing to comply with the new legislation. There must be an opt out for businesses with a turnover of less than 100,000 Euros a year, as these businesses simply do not have the personnel or specialist knowledge to implement the new changes. This legislation, aimed at stopping the tax dodging by multi million Euro companies, has instead disproportionately hit tiny "kitchen table" businesses, meaning they can no longer sell digital downloads direct to the public, and (at the moment) it seems that the only way for them to continue trading is via a third party platform like Amazon which is geared up to handle the VAT - although even this is not entirely clear - thereby increasing the profits of the kind of company that this legislation was aimed at.

Word of the new VAT regulations are now becoming news around the world. Via some small business forums, I have heard the views of businesses from the USA and Australia. The USA attitude is predictably that it is unconstitutional for a USA based business to have to deal with the sales tax (VAT) obligations of the EU, and their response is that they may have to stop selling to Europe. IF this kind of VAT legislation is later increased to cover physical goods, EU customers will start to be unable to purchase goods from outside the EU, as non EU businesses close their doors to us. This is not the way trade should be. The EU was all about improving trade between member states, not putting needless barriers in place.