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.
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!