(Updated 8th December 2014 to include new links): We don’t normally dip our toes into the murky world of politics, but Europe-wide changes to the way VAT is charged for services set to be introduced in January 2015, agreed back in 2008, are causing concern among small comics press creators.
Although MP David Morris was appointed ‘Freelancers Tsar’ some weeks ago, it appears he’s yet to comment on what’s become know as the “#VATMOSS debacle” that is mystifying small businesses.
Some argue that the reforms, which are part of the EU VAT Package ratified in 2008, should only affect a few people in the UK – but Digital Arts argues the changes mean even the smallest small press comic creator will now have to register for VAT – and keep records of sales for 10 years.
“What this basically means, as far as I can tell, is that people selling digital comics now will be forced to track the location of everybody who buys one of their products – which is next to impossible – so they can correctly mark an added VAT charge on top of the existing cost,” notes Steve Morris in a useful round up of the issues on ComicSpire. “They would then need to also be registered for VAT in that particular country, meaning somebody selling digital comics might hypothetically need to fill out paperwork for each of the 28 member states of the EU.”
A change.org petition has gathered almost 9000 signees in protest and the changes have provoked something of a Twitter storm.
The situation has not been helped by HMRC who have provided contradictory responses to business questions.
Enterprise Nation recently reported that Tom Gatten, founder of big data analysis firm Growth Intelligence, suggests the number of those affected is likely to be upwards of 264,000 businesses. His company’s analysis earlier this year entitled Growth Intelligence, Google and NIESR Digital Economy Report suggested that the Government underestimates Britain’s digital economy by a staggering 40 per cent – because it just doesn’t have the right data sets to count.
The solution – HMRC’s Mini One Stop Shop scheme (MOSS) – was designed to stop small firms trading digital products from having to register for VAT in 28 countries.
However it will impose VAT registration on all affected firms regardless of their turnover and will make them report separate detailed quarterly UK VAT accounts and EU VAT transactions or face penalties.
The Daily Telegraph reports the New EU VAT rules threaten to kill UK micro firms. “The EU’s new VAT MOSS rule, which is due to come into force on January 1, will create a #VATMESS and strangle innovation, say the UK’s small business owners,” claims the paper.
Essentially, sadly, selling one ebook is forcing independent creators to follow same complex procedures as companies such as Amazon… without their vast resources to do so. That the whole mess has generated a number of companies offering solutions simply reflects how the implementation of this legislation will skew the digital economy in favour of big, rather than small business.
Opponents to the way the changes are being implemented argue the British government need to agree a de minimis level (ideally the £81,000 UK VAT threshold) below which businesses would be exempt from the new EU VAT rules on place of supply for digital services, removing the administrative burden and avoiding tens of thousands of them having to close.
The HMRC also needs to understand that micro businesses cannot reasonably obtain and check the three pieces of ‘place of supply’ evidence during the purchase process. Campaigners are therefore asking for an exemption allowing micro businesses to be able to use just the customer’s self-declared address as proof, otherwise micro businesses will either have to cease trading or break the law.
In my initial version of this post on 2nd December I reported that some of the affected business leaders will meet with HMRC soon to discuss the situation, but it’s unlikely the changes will be paused. However, as a result of top level meetings between concerned businesses and HMRC, it does look as though the details on how to join VAT-MOSS without losing your UK VAT threshold will be out this week, according to this 4th December post by Clare Jose of Hartfield-based Beyond Alchemy Ltd.
“From the initial comments it sounds pretty sensible and workable. We have asked them to make sure that the guide is written in terms that lay people can understand – without having to hire an accountant,” she reports after meeting Jim Harra (Director General of HMRC Business Tax), Ian Stewart (Director of Indirect Tax, HMRC), Mike Cunningham (Senior Policy Advisor, VAT & Excise at HM Treasury) and David Gauke MP (Financial Secretary to the Treasury), as well as a member of the Number 10 Policy Unit, a representative of Vince Cable’s office and many other senior officials.
“But we need to keep campaigning.”
Comic-related Posts and How This Affects Comics Epublishers
• Steve Morris has outlined the issued affecting digital comics publishers on ComicSpire here
• Ysolda Teague wrote this terrific article about the changes, initially about people selling knitting patterns, but the issues she faces are the same for comic ePublishers
• VATMOSS cartoon by Dave Walker, which he urges all to share but please credit it to Dave and keep the link to his page (Dave draws aa weekly cartoon for the Church Times newspaper – you can also check out his cartoons at www.cyclingcartoons.com and www.cartoonchurch.com)
• Keep writing to your MP and your MEPs (even if your MP is “Freelancer Tsar” David Morris, who does not reply to Twitter questions despite his Prime Minister-appointed role. It’s especially important for anyone in the non-UK EU to write to their MEPs, because we need to raise politicians’ awareness outside of the UK, for them to want to address this problem. The UK can’t change European VAT law on its own.
• Quaderno has offered a solution that might be of interest to small buisnesses – and create your annual VAT report