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British Small Businesses Seek Digital VAT Concessions

by Ulrika Lomas, Tax-News.com, Brussels

09 December 2014


Enterprise Nation – a group of UK small business owners and freelancers – has attended meetings with the UK tax authority, HM Revenue and Customs, as part of a campaign to secure concessions ahead of value-added tax changes affecting suppliers of broadcasting, telecommunications, and electronic services to EU consumers from January 1, 2015.

From this date, the place of supply in respect of supplies of BTE services to consumers is the place where the consumer is established, has a permanent address, or usually resides. Until January 1, 2015, the place of supply of these services to consumers is the place where the supplier is established.

Companies can register in a single member state under the mini one stop shop (MOSS) special schemes being offered by member states to provide an optional, simplified means of registering and accounting electronically for EU VAT. The MOSS special scheme allows for registration and for accounting for EU VAT in a single EU member state. There are no VAT threshold or de minimis rules in the VAT MOSS scheme, so even low value sales must be declared and VAT paid.

During Enterprise Nation's ongoing meetings, the group has sought:

  • A de minimis threshold, where businesses with a turnover of less than GBP81,000 (the UK's VAT registration threshold) would be exempt from the new EU VAT rules on place of supply for digital services;
  • A re-consideration of the data provision element of the legislation, which will otherwise require micro-firms to retrieve and retain sensitive data for ten years. In particular, the group is seeking an exemption from the requirement to obtain additional information to prove the place of supply, requesting that small businesses should instead be allowed to use the customer's self-declared address;
  • Measures to relieve the compliance burden on small platforms and marketplaces; and
  • A clearer explanation of the digital products that will be affected - such as e-books, music, artwork, photos, and how-to-guides, etc.

The group warned that some of their members face closing their business due to the cost of compliance, mainly as a result of the issue of data collection and retention. Many of the organization's members say that they have discussed the matter with other firms and there was a general lack of knowledge about the changes and their impact. Other firms reportedly said that they planned to discontinue selling such services online.

The group said that they had had confirmation that representatives from the UK Government held meetings on December 6 to discuss the group's concerns in Brussels. The UK Government said it would ask the European Commission whether other member states had voiced similar concerns, and to ask whether there is an appetite among other member states for a de minimis threshold.

TAGS: compliance | VAT tax authority guidance | VAT special schemes | VAT registration / deregistration | tax | small business | business | European Commission | value added tax (VAT) | accounting | United Kingdom | tax authority | legislation | micro business | European Union (EU) | services | VAT compliance matters | Europe

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