Hot Off The Press: Concession From UK HMRC Will Enable More Firms To Keep Trading 77

Here’s the update we were promised on Christmas Eve! We have been working on this with HMRC and HM Treasury over the past 2 weeks but had to hold off telling you until they had put it in writing, for obvious reasons.

Basically 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, 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 text:

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.

This is wonderful news for those who have been looking at having to close their doors.

However, the majority of the issues we outlined in our last update still stand, 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.

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.

Thank you for your on-going support and positivity. We’ll be bringing you some more action challenges very soon!

Thank you so much for your continued support!

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77 thoughts on “Hot Off The Press: Concession From UK HMRC Will Enable More Firms To Keep Trading

  • Chris Ward

    HMRC “As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides”. PayPal is by far the most popular. Exactly what 2 pieces of information do they collect?

    • Clare Josa Post author

      This is the discussion we each need to be having with our payment processor or platform – getting them to be transparent and to supply verified information, longer-term.
      PayPal has agreed to talks and we need to make sure they’re asked the right questions!

  • JD Design

    Nice to know they’ve done what they can, but it’s not where we need to be, and only a temporary measure anyway. Finger’s crossed that the pressure on the EU will bring better news.

    • Clare Josa Post author

      Hi JD,
      You’re right – they have done pretty much everything they can.
      Now it’s over to us all, EU-wide, to get the politicians to make the deeper, long-term changes we so urgently need.

  • Chris Ward

    In the HMRC VAT MOSS Flow Chart: “Do you sell to non-business customers in other EU Member States? ” “No” “The rule changes don’t apply to you”. This implies that a UK based seller can simply refuse to sell to people in other EU states and just sell to people in the UK and to people who live outside of the EU (e.g. USA, China etc). Is this the case?

  • Chris Ward

    An IP address is not proof of the customer’s name or location, since it may be dynamic, maybe ghosted (hidden) or the customer may be placing an order via someone else’s computer/network (Employer/Business Customer/Friend/Internet Cafe). Given that IP addresses are not reliable for this purpose, why are they included in the list for “proof of location” items?

    • Clare Josa Post author

      That’s why it’s listed as one of the concerns in the article, Chris.
      It’s a point that the key decision-makers need to understand, which they clearly didn’t when they drew up the legislation.
      However, it’s only the country that needs to be correct, which makes the IP address less unreliable in many cases.

      • Chris Ward

        It is true that the IP Address can be translated to country of origin in many cases, but to be used as evidence, it has to be 100% reliable – yet it never will be and was not intended to be a source of geographical location (Wikipedia is informative).

    • Heather Burns

      I am becoming increasingly incensed at the thought that – not for the first time – the EU bureaucrats basically jotted down a list of “how this internet thing should work” without taking any technical advice on whether their mandated changes were even possible let alone feasible. We saw this with the cookie law, but no one lost their livelihoods over it.

      • Maarten

        IP adresses can be forged. So what? If they are forged, the customer has lied about their whereabouts. That’s fraud. For the purposes of VAT – collection, I don’t think responsibility would rest with the seller to ascertain that the buyer hasn’t lied when asked about their location.

  • Chris Ward

    Even today (29/12/2014) most Micro Businesses have not been formally contacted and informed of the VAT changes and all of the things they must do to meet the new requirements. Is the UK government going to pay compensation to those who will lose sales and indeed those who have been put out of business through not being informed at a reasonable time in advance?

  • Chris Ward

    As a consumer, I can walk into a shop, buy a book (cash transaction) and remain completely anonymous to both the shop and authorities. Given the choice, most people are likely to choose anonymity as this equals privacy. Until now, consumers in the EU could maintain their privacy in on-line transactions too if the goods were digital (such as e-books). The new EU VAT rules disadvantage on-line micro business.

  • Chris Ward

    The new EU VAT rules disadvantage EU on-line micro businesses, who will now have greatly increased costs to manage VAT, necessitating an increase in the price of their products (before VAT is added). This means that EU micro business is less price-competitive with rival vendors outside of the EU for sales outside of the EU. In other words, if an EU e-book vendor had customers in the USA in 2014 for example, those customers are now much more likely to buy from non-EU vendors in 2015.

  • Cari Hislop

    Sadly, the six month moratorium doesn’t really help solve the fundamental issues of collecting data and tax for other countries nor does it help anyone wanting to sell digital products to know whether they’re on the right or wrong side of the law. As someone who uses Pay Pal I don’t have any control over what information is or isn’t gathered or if it’s correct or not (or whether I’m allowed access to the information), but I suspect I will be held accountable regardless. It’s completely insane. I find it particularly disturbing that the issue hasn’t been in the news (not that I’ve noticed and I generally read a variety of papers). Changes that affect so many people (both buyers as well as sellers) should be a headline story…but it’s not. I’m going to have to shut up shop for new customers (until it’s properly sorted) which will understandably irritate people. It’s just so frustrating.

  • Stephen Mainwaring

    Unfortunately this concession is of no help at all.

    IIRC PayPal do not indicate the country where the purchase is being made but rather indicate the country the PayPal customer resided when they created the PayPal account or when they made a non PayPal account payment. Thus this can not be used to determine which country is applicable to the transaction and therefore it’s a fail.

    This is just a gimmick. It is offered a few days before the deadline and allows HMRC and politicians to say

    “We have engaged intensely with small businesses and offered them generous concessions”.

    Notice the date too. It gives a false hope to small businesses to fool them into not closing on 1st Jan but into carrying on … until after the May elections.

    If any small e-traders are left after that date you can be damn sure the concessions will be gone and it’s pay up or else.

    • Clare Josa Post author

      Hi Stephen,
      It was offered as a concession after huge pressure from the campaign to allow us to keep trading while we negotiate a threshold and a reworking of the rules. It was not a gimmick.
      The timing was because it took us until 2 days before Christmas to convince HMRC that most businesses only have access to the payment provider customer address and can’t reasonably compare it to IP / mobile phone / bank location data. This has been a very long journey, in just six weeks, for the HMRC & HM Treasury teams. No one else had explained this to them over the past six years of consultation.
      Yes, as you say, it’s not a complete and accurate implementation of the rules of the new law.
      However, it is the only data currently available to most businesses at the moment and, as such, HMRC has agreed to accept it as adequate evidence until 30th June 2015.
      Without this, tens of thousands of businesses would have had to make the choice yesterday between breaking the law or closing their doors.
      So, yes, to many of them, this concession is a big help. It enables them to keep trading.
      Best wishes,
      Clare & the EU VAT Team

  • ejunkieguru

    One workable solution to accommodate the new VAT rules may be treating product price settings as gross incl. VAT — thereby allowing you to advertise the same, flat price to all buyers regardless of their location — and then calculating the VAT component out of those gross prices after checkout, at which point sufficient location data becomes available to confirm and document the 2-way match necessary to establish the buyer’s “place of supply” and determine the proper VAT rate for any digital goods/services accordingly.

    To accommodate this approach, you would simply need to raise your prices to incorporate a uniform “VAT overhead” factor sufficient to cover your total expected VAT liability. You could simply set this overhead factor equal to the maximum VAT rate you expect to be subject to, or you could take a savvier approach by looking at your sales history for each EU nation and their respective VAT rates to calculate an average overhead factor that would cover your total expected VAT liability.

    This approach would also eliminate any financial motive for buyers to falsify their IP or otherwise self-declare their location dishonestly, as doing so would not affect the price they pay. If consumers have no reason to deliberately falsify their IP (e.g. by connecting to your site via a proxy located abroad), then their connection IP can reasonably be presumed as accurate, and thus GeoIP lookup becomes a reasonably reliable data point for determining the buyer’s purchase location at least down to the country level, which is sufficient to determine their VAT rate if correlated with another, unrelated country-level location data point (e.g. Billing/Shipping address or PayPal account’s registered Residence country).

  • David Webber

    I am asking myself all the questions Chris has set down.

    I write and sell specialist software to a niche market. I am nowhere near the UK VAT threshold and am not VAT registered. It appears that sales of CD-ROM via mail order will be unaffected. But I also offer the same software in the form of a download, as a slightly cheaper alternative – as I have no production or postage costs. For sales to the EU, adding the VAT would make the download more expensive than the CD-ROM, and I can’t imagine that anyone would want to pay more for the privilege of not having the CD. So my only sensible option is to withdraw the download option from customers in the EU.

    90% of my EU sales outside the UK last year were downloads. So if the new law goes ahead tomorrow as planed, I’m going to lose business. And, as a measure of how absolutely crackers this all is, the government will therefore get less from me in Corporation Tax.

    The government loves small businesses – this is obvious because they’re doing their level best to make mine smaller, and I’m sure they’ll succeed.

    On the other hand, if, as has been said here, they’re having a rethink, is there *any* possibility that I don’t have to withdraw my download option tomorrow????

  • Chris Ward

    The new EU VAT rules disadvantage EU on-line micro businesses:
    Put yourself in the position of the consumer who is now going to be asked to hand-over personal information. They have seen giant corporations such as Sony, Microsoft, Coca-Cola, Nissan, Adobe etc get hacked and customer data stolen. Yet they know these companies at least have the resources (money, infrastructure and expertise) to make trading with them as safe as possible. They also know that ‘big’ companies are unlikely to sell-off their customer data, it won’t be passed to dubious third parties.

    What do they know of the average one-man-band micro business? That their security could never be as good and that they might be tempted to sell customer data, or even use it for criminal purposes. The micro business image will be transformed from respectable niche experts to untrustworthy high risk chancers.

    • David Webber

      I can reassure you on this point, at least. I don’t think it should be a problem if you go about your business in a professional way. The first paragraph of my ‘terms and conditions’ page (which my merchant bank requires me to have) reads:

      “Your privacy
      Mozart Music Software does not share the names and addresses of its customers with third parties. Mozart Music Software does not retain customers’ credit card details, which are used exclusively by our merchant bank service provider in order to complete transactions securely.
      You have the legal right to contact us and find out exactly what data we hold about you.”

      No-one has ever acted upon that last statement! We offer sales both via PayPal and via Visa and MasterCard. Credit card transactions are handled by the 3rd party gateway “SagePay”, and we never see the credit card details, but the SagePay page where customers type in card details merges (fairly) seamlessly with ours, where they type in their address. [SagePay charge a flat fee of £30/month.]

      I’ve really never had a problem with this. Over the years more people are starting to use the PayPal option, as I think more people trust PayPal than was the case 10 years ago. And CreditCard transactions are also getting safer as banks impose greater security. Also many people actually *like* to do business with small companies/sole traders, as they value the personal service and support.

      So yes, this VAT law is heinous, and crippling for small businesses, but I don’t think it is worthwhile to pursue this particular point.

      • Stephen Mainwaring

        David, the point is that many small businesses do not understand basic website security.

        Thousands of websites (especially WordPress, and shared hosted sites) are compromised in some way. Some inject log spam, some are used to garner email addresses. In the worst case backdoors are installed to capture names, addresses and banking information.

        Much in the same way a car boot seller does not have armed guards at their table, or 500lb safes anchored to their car these websites have little in the way of security.

        The point is that if small traders now have to record names, addresses, IPs, phone numbers then this is rich pickings for people who trade in this information.

        If I can offer advice: never store this stuff on a website or cloud service. If your website is going to record that information then at the very least make sure all of the information is totally encrypted but ideally store it offline, in an encrypted spreadsheet / database.

      • Chris Ward

        You will need to change your disclaimer from 01/01 because you will then be required to store customer information as supporting evidence for 10 years, unless SagePay are taking responsibility for the transaction including storing the customer data and paying the VAT directly to HMRC.

        See the HRMC list:

  • Chris Ward

    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.

    A great achievement in terms of getting HMRC to think about what they can do to help Micro Businesses – but is the thinking right?

    The payment processors do not all operate in the same way, but looking at PayPal, currently by far the most popular, starting with a consumer clicking a PayPal ‘Add To Cart’ button on your website: This generates data for an invoice, presented to the buyer within their own PayPal on-line account. They commit to the purchase within their PayPal account. This means that the final price including VAT must be on your website, because this is the value currently received by the PayPal mechanism. Within your PayPal Account, you must input the VAT rate for every EU country (in ‘Set Up International VAT Rates’) . If the rates are changed, you have to change them in your PayPal account accordingly – which means you will have to halt EU sales from your website until that is up-dated in unison.

    So, in order to continue to use PayPal, your website needs to be completely redesigned such that it verifies the geographical location of the customer, and presents them with a calculated VAT inclusive price based on their location.
    Clearly, very few (if any) Micro businesses will be able to make such changes to their website immediately, unless they happen to be experts at HTML5/PHP, CSS3, Javascript, website security and so on. Therefore, for the time being, PayPal and similar payment processors cannot actually be used.

    • williamspd

      To work around this (so that my business can actually trade and not go dormant) I am considering just offering a uniform price through Paypal and then calculating the EUVAT retrospectively, thus variably eating into my profits. The initial difficulty I am encountering so far is that customers can enter ‘No Delivery Address Required’ when purchasing through Paypal and so I am not sure how I can then get the required customer geographical information from Paypal.

      • Chris Ward

        You simply won’t get the geo data from PayPal. The EU VAT Action team have a meeting arranged with them – that will help PayPal understand what is going on. However, they won’t do much, if anything, unless they are forced to by one of the governments.

        Just look at their history – PayPal’s development of their service and web interface has been extremely slow. Right now, their priority is the re-organisation of their infrastructure as they re-split from ebay.

      • Chris Ward

        If you are in the UK, your site must show the final VAT inclusive price. I notice that vendors in other EU countries also show the gross price, so probably the rule applies in those countries too.

  • ejunkieguru

    One solution to accommodate the new VAT rules may be treating product price settings as gross incl. VAT — thereby allowing you to advertise the same, fixed price to all buyers regardless of their location — and then calculating the VAT component out of those fixed, gross prices AFTER checkout, at which point sufficient location data becomes available to determine the proper VAT rate for any digital goods/services accordingly.

    To accommodate this approach, you would want to raise your prices to incorporate a uniform “VAT overhead” factor sufficient to cover your total expected VAT liability. You could simply set this overhead factor equal to the maximum VAT rate you expect to be subject to, or you could take a savvier approach by looking at your sales history for each EU nation and their respective VAT rates to calculate an average overhead factor that would cover your total expected VAT liability.

    This approach would also eliminate any financial motive for buyers to falsify their IP or otherwise self-declare their location dishonestly, as doing so would not affect the price they pay. If buyers have no reason to deliberately falsify their IP (e.g. by connecting to your site via a proxy located abroad), then their connection IP can reasonably be presumed as accurate, and thus GeoIP lookup becomes a reasonably reliable data point for determining the buyer’s purchase location at least down to the country level, which is sufficient to determine their VAT rate if correlated with one other, unrelated country-level location data point (Shipping country or other self-declared country, Billing country or PayPal account’s registered Residence country).

    • Clare Josa Post author

      This work-around is definitely something we’re seeing people doing.
      But it’s hard not to price yourself out of the market with it.
      Most of these businesses, in the UK at least, are below the current VAT threshold, so any ‘fudge factor’ will put up their prices. Given how competitive the digital market place is, this will make them less attractive than competitors who are not trading with the non-UK EU.
      Given how random it is where your sales come from in a global marketplace, it’s quite tricky for most businesses to calculate a ‘VAT overhead’ factor.
      The purchase location is still a tricky one. It’s still not clear what should happen if someone normally resident in Germany, but originally from France, so using their French credit card, is temporarily on holiday in Italy.

      • Chris Ward

        It flies in the face of the EU VAT intentions, so they might pick up on it. It is also awkward for non-EU sales to customers that are not liable for VAT – your products will potentially be uncompetitive. That said, without better mechanisms being available from website builders, cart suppliers and payment processes, there is scant choice for the Micro Business.

  • Stephen Mainwaring

    With reference to the point about using GEOIP to check the country where the IP is based. There is another situation, which I believe has not been mentioned yet: email / newsletter buy buttons.

    If you send out newsletters you may be using buy now buttons, or links to your PayPal email account. This means that your customers can read the email, click the buy now button and pay directly to PayPal. PayPal will then let you know that XYZ customer has made a payment.

    Now here’s the problem: the customer has not even visited your site until after the payment has been made! In fact, if you have an automated script that sends them a file then they may never visit your site at all and thus you will never known what their IP address is.

    In this instance there is no way you can check their IP address. This is an epic fail.

    • Clare Josa Post author

      This whole thing is just such a mess. Thank you Stephen. Hadn’t spotted that one. But yes, it’s an obvious epic fail, once you see it. Will add it to the admin burden / chaos listing.

  • Chris Ward

    “PayPal has agreed to talks and we need to make sure they’re asked the right questions!”

    Since in the UK at least, prices must be shown as either VAT inclusive or the VAT value shown alongside, we need PayPal to accept both values inclusive of VAT and values exclusive of VAT, with a code mechanism/flag that tells PayPal which value ‘type’ it is receiving. It would make sense to also have a code mechanism/flag which indicates that VAT should not be applied to a specific value.

    The evidence data collected by PayPal should be clearly shown on the customer’s invoice. I suggest a short statement explaining that it is collected to comply with EU VAT rules should also be there. So, if PayPal collect the customer’s IP address, it should be on the invoice so that the customer knows exactly what is going on.

    It is possible that PayPal are translating the IP address to find the country of location. This should be done by their own code on their own servers. A number of company websites are using Google API for this purpose, which is actually run from Google’s servers. Google deliver many very useful free services of this kind but their servers are often down or the code moved/changed without notice. It would therefore be too risky for payment processors to use the Google services.

    In PayPal’s current set-up, the Micro Business has to list all VAT rates for all EU countries manually, and is responsible for keeping them up-to-date – better than nothing but sure to lead to serious errors. Instead of thousands of business customers doing this, it makes common sense that PayPal should do it.

    Perhaps PayPal could be asked if they would consider delivering a premium service where they pay the VAT to the relevant tax authority and take responsibility for storing the customer data for 10 years? I’m sure they are thinking about this because competitor services could seriously damage their market share – but I would ask them to avoid being greedy and keep their rates as low as possible for the Micro Business. They will surely reap rewards when some of them grow – Microsoft started as a Micro Business, as did countless others – perhaps that is a message that also needs to get through to the EU.

    • David Webber

      I’m sure PayPal could do more to help, but PayPal is not the only way people pay for things over the internet, and I think this is focussing on the wrong question.

      Given that anybody, selling a single PDF file, to a single customer in the EU, for 5p, on one occasion only, is now in breach of the law unless they charge VAT at the appropriate rate, the asinine state of the law is clear: what is needed is a VAT registration threshold similar to (or the same as) that for selling physical goods. That is by far the most important question for this campaign to focus on.

      • Chris Ward

        That is entirely true David, without a sensible threshold, the Micro Businesses with low turnover (most likely the majority) will simply be no more.

        Everything else is very important though, if the new EU VAT system is here to stay.

        Given that the EU have stated that it is their intention to encourage and nurture business growth, especially for EU businesses venturing outside of the EU market (for which EU digital business is both well suited and currently well positioned with an abundance of talented individuals), this campaign should be challenging the new rules altogether.

        It is perfectly clear that (1) The rules are not going to curb the dubious activities of the giant non-EU companies as they were originally intended. (2) They are going to damage or destroy many, possibly the majority of EU Micro/Small Businesses. (3) If the rules are rolled-out to cover physical goods this time next year as planned, the entire EU economy will suffer, businesses of all sizes and all the EU consumers.

        Common sense: an initiative that cannot meet it’s goals and makes things worst rather than better should be withdrawn. There isn’t any shame in doing so. The shame would be to go ahead regardless of all the warning signs and plunge the marketplace into disarray. All of the EU members are in austerity. The EU VAT system as of today will clearly result in increased prices and less choice for the consumer.

        It’s all completely unnecessary.

  • Chris Ward

    EU VAT rates. The EU state that these will be updated centrally on the EU website – the countries concerned must forward their changes to the EU in a timely manner. (1) The EU should send out notifications of change (opt in email). (2) Currently the data is presented in a human-friendly tabulated pdf format, but a computer application friendly version is required too.

  • Petr

    What is going wrong with this world? I should care that I have not enough customers but now I care about how to say to my customers: “don’t send me money, please” :-( :-(

  • aand

    There are several, free-of-charge plugins available today (and has been for some time) for shop systems such as Woocommerce, that allows shop owners to capture IP addresses and show the correct VAT rate depending on location at checkout. And it’s all done automatically and stored alongside the order.

    There’s even a $20 plugin that detects visitor location and shows the correct VAT rates as soon as the visitor arrives at the website.

    If we’ve got the billing address captured (and we will have this, as it goes on the invoice in any case) + the IP address, we’ve essentially lived up to the requirements, as I see it.

    Granted, if you’re not running a webshop system, things could become more complicated. I also think the no-threshold approach to VAT + the lack of clear, official information are serious problems with the rules in general.

    But if you are running a shop system like Woocommerce, it’s by no means as hard to manage the evidence, VAT rates and data collection as you make it out to on your Key Facts sheet.

    The solutions are available today, and many of them don’t cost anything. Perhaps the list needs updating to reflect this?

    • Clare Josa Post author

      Hi Aand,
      IP addresses are notoriously inaccurate and were never intended to be a reliable means of confirming geographic location. They are also easily faked and often not available.
      For your average micro biz running with something like PayPal ‘buy now’ buttons, most of those plugins won’t work.
      Very, very few of them are running a full webshop system.
      As you say, the absence of a threshold and the total lack of consideration of this business sector are serious problems – that’s why we have to keep campaigning for a suspension of the legislation while this is sorted.
      We have not yet come across any plugin that is truly compliant – i.e. can display the correct price, charge the correct VAT rate (some transactions will have products with 2 different rates and perhaps even 2 different countries in them), produce the approved VAT invoices and accurately compare the 2-3 pieces of data required.
      If you know of one, please let us know!

      • aand

        Hi Clare,

        You’re right that IP addresses may not always be completely reliable – but extracting country information from them should be doable in most cases. And, at the end of the day, they’re officially considered acceptable evidence, so if we capture them, we’re upholding our end of the bargain.

        You’re also right that things may become somewhat more complicated for shop owners who’ve been relying on simple Paypal Buy Now buttons. This could actually be a great opportunity to land some more business for companies like Paypal, so I wouldn’t be surprised if they offered up a compliant solution for these cases in the near future. There’s also Taxamo which claims to offer a solution for a wide range of shop systems, and even for Paypal’s stand-alone ‘Pay Now’ buttons. I don’t have any experience with them myself, though – and it does cost per transaction.

        For other alternatives, maybe it could be worth considering shop systems like Woocommerce or similar – these are very affordable (essentially just the $60 for a good WordPress theme + plugins). The drawback is of course the time it takes to configure them initially. There are also various hosted shop services like Fastspring & similar that claim to handle the compliance for their users.

        Now, as for Woocommerce, to get everything up and running takes two plugins: One is called Tax Display by Country, which uses geo-location to (very accurately) detect visitor location and show the correct VAT rates. It’s been working incredibly well in my shop to ensure that visitors see the right prices from the get-go. It’s from an Irish company called Aelia and is around $20.

        I’m also using their free EU VAT Assistant which completes the second part of the puzzle of capturing and storing the evidence, updating to the correct VAT rates across the board in the shop backend + helps in generating reports that’ll greatly simplify filling out the MOSS reporting. I’ve got nothing to do with that Aelia company – but this is the setup I’m using in my shop, and it’s working really well so far.

        So there are solutions – even free ones – out there to make this work. Hope this helps a bit!

      • David Webber

        Yes IP-Addresses are not necessarily reliable. I use the IP address of visitors to my site to decide to use GBP USD or EUR as a default currency for showing prices – but nothing more. (And people can change the currency option.)

        I’ve just been updating the php programming which looks up the country and asked members of my user chat group to visit
        to see if it calculated their country correctly. A dozen or so reported success. One tried it from his employer in Greenwich – which is now apparently in France :-( Another in the channel islands found himself in GB (even though there are separate banks of IP addresses allocated to both Jersey and Guernsey).

      • Chris Ward

        Not only are they unreliable in terms of customer location, in most current desktop operating systems, dynamic IP configuration is enabled by default. So, if you store an IP address as evidence of location, the longevity of that evidence is an issue – the customer might only have that IP for an hour, or maybe a few days or weeks – but it will not endure for 10 years. The IP address cannot be traced back to the customer at sometime in the future and it is therefore wrong to associate a person with an IP address.

    • Chris Ward

      Woocommerce is only for WordPress based websites. From their site: “Bundled with PayPal (for accepting credit card & PayPal account payments)”. PayPal is not ready for the new EU VAT rules……..

  • Petr

    Unfortunately, for me, there is no plugin which can meet the criteria. From my own experience, over 20% of micro-purchases on my site were done by other people than the them who made orders (include IP). For example: somebody does not have a PayPal account, so asks friend for making e.g. 3usd payment. Someone buys something and let his customer to pay it, etc. Over 60% were done by “quick purchase” where I don’t have any data except the one from PayPal.

    Not sure if you read the case studies how people buy. They don’t want to go through all the checkout pages, they just want to click on “buy now” or make “guest checkout”, so then every information is only the one which is provided by payment gateway. So in most of cases, if PayPal will not provide the information, there is nothing to do. :-(

    There are more problems which plugins cannot solve:

    – how to store customer’s data (10 years) and have them safe and of course you will need some certificate to work with customer’s data
    – how to deal with thousands of customers (e.g. purchasing 1usd photo) – it is large administrative burden
    – refunds, stolen credit cards and identities ???
    – if you are not VAT payer, you will pay VAT and if you cannot meet criteria of MOSS, you will pay VAT and fees on third party market place (VAT + PayPal Fee + Market Place Provider Fee + Income tax – even if you then buy something with this money you will pay VAT – this will kill your business)
    – you cannot make experience – mostly, you don’t know if your service can earn something and you just want to try it – but if you register to MOSS – you need to archive data for 10 years and you need to do reports for at least two years about your customers (even you don’t have any more)
    – from 1.1. 2015 to 3.1. 2015 – my friend who is registered in MOSS he lost 90% of customers because they don’t want to be identified (and written in some list) because they sent 2usd per PayPal!!!
    – etc.


    This rule will do following people out of a job:

    – disabled people (invalid) – mostly, providing services through internet is the only one chance how to earn some money
    – sick people – the same like by disabled people
    – single mothers – they need to care about their children but they can work through internet in such case – but this is not more possible (this can be applied to all people who care about their parents)
    – young people (graduates) – mostly young people are experienced with internet and this can be great chance for them – not more :-(
    – and many others

    In EU there is a large group of unemployed. Unemployed are mostly:
    – young people (graduates)
    – single mothers
    – sick people
    – disabled people

    WHAT TO SAY???? It is like a nightmare!!!!

    Please share this information everywhere you can, it is very important, because:

    “First they came for the Socialists, and I did not speak out —
    Because I was not a Socialist.
    Then they came for the Trade Unionists, and I did not speak out —
    Because I was not a Trade Unionist.
    Then they came for the Jews, and I did not speak out —
    Because I was not a Jew.
    Then they came for me — and there was no one left to speak for me.”

    Statement by Martin Niemöller, source:

  • Chris Ward

    Registration with the ICO

    The Data Protection Act 1998 requires every data controller (eg organisation, sole trader) who is processing personal information to register with the ICO, unless they are exempt.

    If you handle personal information, you may need to register as a data controller with the ICO. Registration is a statutory requirement and every organisation that processes personal information must register with the ICO, unless they are exempt. Failure to register is a criminal offence.

    Storing customer data for 10 years fits this requirement! Registration costs £35, yet another expense that is trivial for the big companies but a blow for the Micro Business.

    I think Vince Cable should pay this fee for all Micro Businesses……..

  • Stephanne

    I really find the whole idea perplexing to me. Here in the US, the individual states set sales taxes at varying rates much like differences among the EU member states. Our states don’t like missing out on sales tax revenue on internet sales any more than the EU likes missing out on the taxes due to them. But the US states came up with a far better solution IMO (or at least the state I live in did, as I don’t file taxes in the other 49 to know what they do). Rather than trying to force every business on the planet to collect and remit sales tax to the state for the purchases made by it’s citizens, it puts the responsibility on it’s citizens who it has direct authority and control over. Very simple really, it’s called use tax here. On my state tax return I am asked to enter on the use tax line the amount of state sales tax that is due on any internet purchases I have made. I have two choices, I can either collect my receipts for the things I buy online and pay the actual amount due (an be prepared to back it up if audited) or I can use a table provided with my instructions an pay a flat rate based on income if I don’t want the headache of keeping track of that. This is enforceable and manageable by the state. I’m not sure how the EU ever expects to begin to come close to making all the global businesses comply. It’s impossible. So while I’m sure it will lead to an increase in tax revenue, it will also lead to a huge increase in paperwork and headache for them. The smarter, better way would be to require their citizens to remit the VAT they owe on internet purchases on their individual tax returns. It requires very little increase in paperwork as the citizens are already going to be filing their tax returns and I’m willing to bet that it results in more revenue than this ridiculous law that has them chasing down businesses in countries all over the world. Yes, have the businesses in your country, or frankly within the EU if that’s what you want, collect and remit the VAT Tax on it’s citizens but leave the rest of the world out of it!

    • Chris Ward

      The USA method of collection wouldn’t work in the UK, it would be sure to be heavily resisted by Joe Public, most of whom do not have to file a tax return because Income Tax is deducted from their wages by their employer. I think the situation is similar in other EU countries too.

      The EU are expecting businesses outside of the EU to collect VAT from customers within the EU. I really can’t see that working and I don’t see how any EU Government could muster the manpower to police the system (in and out of the EU) without making administrative losses – especially when the system rolls-out to cover physical goods.

      As it stands, if a person sells a few knitting patterns per year (digital pdf from their website) and does not charge VAT or store customer details for 10 years, they are in breach of EU VAT Law. If these terrible villains are tracked down and prosecuted, what will it have cost the respective governments to do so? I think all the EU countries should be spending their funds on more important things.

  • Chris Ward

    Letter to Vince Cable, UK Secretary of State for Business, Innovation and Skills, from MEPs Molly Scott Cato and Keith Taylor, 03/12/0214:

    Call for UK Government Action by Molly Scott Cato MEP, 10/12/2014:

    Call for Europe-wide VAT exemption for micro-businesses in wake of new tax rules by Molly Scott Cato MEP, 01/01/2015:

    Quote from Molly Scott Cato MEP on FaceBook: “I have worked for about 15 years as an economist and I must say that what really shocks me about the problem small businesses will face with the VAT changes is that politicians in general are so out of touch with the way ordinary people make their living.”

  • Adrian Jones

    I spoke to HMRC back in early December and after trying at length to explain to them that Paypal don’t provide the IP address or even the billing details they finally agreed that when using Paypal they will accept the country they provide as all the evidence required. This was confirmed with the persons supervisor as well. No mention of any time limit on this was mentioned (it was before HMRC’s concessions were discussed anyway) so I don’t consider that ends in 6 months. I double checked that the call was recorded to stop them backing out of the agreement and they gave me the call recoding reference number for that purpose. Why don’t they go and force Paypal, an EU registered financial services company, to comply with these rules instead of hassling small businesses who can only work with the data we are provided.

  • Chris Ward

    The World Wide Web Consortium (W3C) is working on an accurate method of collecting location data.

    The scheme is work in progress but already has the support of all major browsers and development is backed by Google.

    It seems to me that if the EU prevail and consumer location data must be collected by sellers, it makes sense to wait for the appropriate technology to become available, rather investing in something now (Geo-location from IP Address) that is unreliable.

      • aand

        IP addresses have all been matching with the billing address given in my shop so far. And then there’s this, from the explanatory notes from the EU: “As a rule, businesses should not be held liable for misuse or abuse by their customers”

        Clare, did you get the chance to check out the plug-ins I mentioned that allow (at least Woocommerce shop owners) to display the correct VAT rates from the second the visitor lands on the site + help capture the required data on checkout? They actually resolve some of the issues you mention here and elsewhere on the site (though not all, of course)

      • Chris Ward

        It is already working, hence the support of the Browsers (Chrome, FireFox etc). However, what tends to happen with all things www is that the method (aka API) gets adopted by the commercial world and then sometime later it is formally embodied in the W3C standards. Google are clearly pushing it along, but there is no hint of awareness in terms of what it could do for EU VAT (or, indeed, upcoming USA VAT).

  • Chris Ward

    My internet service provider is PlusNet Plc (UK). I have noticed in the past few days that my IP is not a fixed number, it varies from day-to-day. The geo-location data always points at them (Sheffield, England) and not me (Swansea, Wales). The country code is either ‘UK’ or ‘GB’, which is useful when correct, but it does show how fragile the system is if used for unintended purposes.

  • Chris Ward

    HMRC have a dedicated email address for EU VAT. If you need to query anything with them, it is best to do so via email since you then have a written response – via the phone, responses have been known to be contradictory, so if you are going to commit your business to something that HMRC has told you, better you have that info in writing.

    The email address:

    My email to HMRC:

    Subject: VAT 2015 British Overseas Territory
    From: Chris Ward
    Date: 21/01/2015 23:22

    Dear HMRC

    Question concerning British Overseas Territory

    The Sovereign Base Areas of Akrotiri and Dhekelia, on the island of Cyprus (Republic of Cyprus).
    Where do these territories stand with respect to UK/EU VAT?

    Yours Faithfully

    C J Ward

  • Chris Ward

    Countries having different VAT rates for different regions make verifying the buyer’s location impossible using some of the sources suggested by the EU/HMRC.

    If lucky, the IP address will translate to a Country Name. It will not necessarily drill-down from there to a VAT region within that country.

    You cannot use a Bank Code to verify either, because the Bank Codes only include or translate to the ISO 3166-1 country code, which in most cases includes all of the VAT regions within the same country. For example the code for Greece is EL. The code for the Greek VAT region Lesbos is also EL, but the VAT rates are very different.

  • Chris Ward

    Subject: Electronic Services EU VAT
    From: Chris Ward
    Date: 01/02/2015 22:30
    To: “”

    Dear HMRC

    Some of my software is B2C and can be paid for and downloaded for immediate use. Certainly, that seems to fall under the ‘Electronic Services’ umbrella for EU VAT.

    Other application software I write is both B2B and B2C, and it is either an add-on or separate application that compliments CAD-CAM applications. These apps can also be paid for and downloaded, but their use is initially limited to 10-15 days. During that time, the customer must email me a hardware lock key generated by the app. I process this key and email back a License ‘string’ which the customer then copy-pastes into the app to release the time limitation. The need for the License prevents the app from being used on any other PC and is designed to combat software pirating.

    Given this manual element of input before the product can be used, does this mean the app is not an ‘Electronic Service’ with respect to the EU VAT rules?

    Yours faithfully

    Chris Ward

  • Chris Ward

    More about Location

    All the popular browsers now support ‘Geolocation’. This is in an API (‘Application Programming Interface’) for software developers to use. It is software code that can use all available means to work out where the Browser User (your customer) is located. It is accurate but slow if your customer is using a device like a Smart Phone because it can use GSM. It is inaccurate but fast if your customer is using a computer because it falls-back to using their IP address.

    However, accuracy and speed are not the only problems. A bigger issue form the Seller’s perspective is customer privacy. Your customers may not want you to know their location and their Browser will not release the data unless the Customer allows it (usually via a yes/no pop-up).

    From Mozilla, the FireFox people:

    “Note: For security reasons, when a web page tries to access location information, the user is notified and asked to grant permission. Be aware that each browser has its own policies and methods for requesting this permission.”

  • Chris Ward

    German Tax Authority not allowed to answer questions about their application of Electronic Services EU VAT

    That’s right – I have just received a courteous reply to my email asking for clarification on VAT rates and the situation with regards to the island of Heligoland and the territory of Büsingen. The Authority would like to help but they are not allowed to………….