There was some good news for comic creators who sell e-comics via their web sites over the Christmas period thanks to the EU VAT Action Group. As a result of their sustained and hard fought campaigning, HMRC has agreed that, for those in the UK below the VAT threshold, you can use the information provided by your payment processor (PayPal or equivalent) as your evidence for proof of place of supply until the end of June.
“This is an enormous achievement,” say the campaigners, “due to the thousands of people who have taken action in this campaign, so thank you!
“It’s not perfect. It doesn’t fix the rest of the problems. To be honest (see below) HMRC themselves can’t fix most of those. But it WILL allow more people to keep trading, while we all negotiate a reworking of the rules and a sensible threshold.
Here’s the full text of the HMRC announcement:
Support for MOSS registered micro-businesses until 30 June 2015
UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider. This means the business need not require further information to be supplied by the customer.
As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides, the transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.
As we previously reported, new rules on VAT come into force on 1st January 2015, unfairly disadvantaging the EU’s smallest businesses – and many are already giving up in fear of the demands of the new regulations.
Some comic creators have held pre- 1st January sales before the #VATMESS situation forces them to shut up shop, while other creators, such as SF author Diane Duane, has implemented new e-store policies to try to abide by the demands for data from the EU, which mean records will need to be kept for 10 years.
“This is wonderful news for those who have been looking at having to close their doors,” say the campaigners on the concession. “However, the majority of the issues we outlined, including:
- We don’t know what the price is until after the sale, because we don’t know the location (and hence VAT rate) until after the checkout
- We can’t always apply the correct VAT rate because most checkout systems cannot handle the new level of complexity, and most micro businesses are too small to have access to the more flexible ‘big player’ custom-programmed systems
- You can’t please each EU Member State – many are interpreting the definition of ‘digitally-delivered’ differently
- The assumptions the EU used to implement the legislation without considering the impact on the smallest businesses and sole traders were fundamentally flawed, because they incorrectly assumed that we don’t trade internationally and that we all use 3rd party platforms – most of whom will not be compliant with the legislation
- Consumers can still ‘fake’ their IP address (a proof of place of supply) and after this 6 month concession we will still need to have ways to collect and compare the 2-3 pieces of evidence for location
- The data protection issues have still not been resolved and are a huge cause for concern
- The administrative burden of having to process even the tiniest transactions to retrospectively apply the correct rate of VAT is unreasonable, compared to the amount of VAT that will be collected from most micro businesses
- These issues are beyond the scope of HMRC to include in their initial ‘light touch’ approach and require an urgent re-working of the legislation.
“We need each EU Member State’s government to put pressure on the EU decision-makers to remove these unintended consequences and to allow businesses to keep trading in 2015,” the campaign group urges. “We will continue to actively and urgently campaign for a suspension of the legislation, while it is fully reviewed, to make it workable, long-term, with a sensible exemption threshold.”
• For the latest information on this ongoing campaign to help small business and comic creators across the EU visit http://euvataction.org
• Check out the VAT Action Team web site to see what you can do in the UK to campaign against the changes
• Write 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