Fierce lobbying forces HMRC to amend the 2015 EU VAT Rule

Fierce lobbying forces HMRC to amend the 2015 EU VAT Rule

Date04 Dec 2014
Posted ByAdmin

HMRC’s plan to change the 2015 EU VAT rule, which will make VAT on digital products chargeable at the place of purchase rather than the place of supply, met with resistance following a relentless online campaign by micro-business owners, Enterprise Nation and the Telegraph. In fact, it got HMRC to amend the controversial tax rule, albeit slightly.

According to the latest update from the Telegraph and confirmed on HMRC's live webinar on December 2, the new EU VAT rule changes will go as per plan, except that while SMEs will still have to register in the UK to use MOSS they will not need to pay UK VAT on their domestic sales. HMRC is currently preparing detailed guidance for businesses on this issue and it will be published soon.

An HMRC spokesman said, "Businesses below the current VAT registration threshold that can separate their sales to UK customers from sales to EU customers can voluntarily register the cross border element of their business, and then use that registration number to register for MOSS. This means that their domestic sales will remain VAT free."

Alan McCappin, Practice manager at Bradleys Accountants said, “EU VAT rule changes, handled correctly or incorrectly, will come into effect on 1 January 2015, but the latest update should be seen in a positive light as e-businesses will be able to join MOSS without losing the UK threshold.”

HMRC’s change in stance follows their acceptance of an invitation to a face-to-face meeting with 10 affected micro-business consultancies at Enterprise Nation’s offices. The meeting will take place today to discuss the effect of VATMOSS on the smallest of businesses and how the government plans to support and guide businesses through it. The following individuals have been chosen to represent thousands of micro-business owners that might be affected by the new EU VAT rule changes:

  • Issy Zinaburg, who started the VATMOSS petition 
  • Caroline Flexman - Journey2Bliss
  • Emily Coltman - chief accountant at Free Agent
  • Clare Josa - Beyond Alchemy Limited
  • Nadia Finer - Smartli
  • Patricia van den Akker - The Design Trust
  • Ysolda Teague - Scottish designer
  • Mark Littlewood - Mark Littlewood Events
  • Nigel Whiteoak - accountant
  • Emma Jones - Enterprise Nation

The change in regulation, partly stems from an increasing public dissatisfaction in the way digital companies like Google and Amazon paid their VAT in the past. In order to stop these multinationals from diverting their European sales through low-VAT EU countries like Luxembourg, the government introduced the new regulation. According to the Office of National Statistics, there are an estimated 460,000 sole-traders in the UK.