UK & EU friends... Help SAVE small businesses from being impacted by hugely crazy VAT law, that will effectively close down their capacity to operate online. (Thousands and thousands of people rely on using online platform, offering services, for their financial survival) You can send this letter (thanks to Sarah Varcas for composing) to your local MPs MEPs and House of Lords via this site: (Takes 10 mins - the letter is edited to be a form letter) letter.https://writetothem/write Dear ...... 1) The rules apply to anyone selling ‘digital products’ and ‘e services’ on line. There are some rough definitions of what this means, but even those given by the HMRC are contradictory so we have yet to discover in practice precisely which products and services are covered and which aren’t. It may well be that individual businesses only discover they should comply with these regulations when they are penalised by other EU countries for not having done so. 2) They remove the current £81,000 VAT threshold from any business which sells these products, thus necessitating they become VAT registered regardless of their turnover. This brings thousands of small businesses, many of whom are sole traders, into the VAT bracket. 3) They change the ‘place of supply’ of these goods to the location of the customer as opposed to that of the business, which necessitates that VAT be charged according to the country of the customer. This requires businesses to apply varying VAT rates to their sales according to their customer’s location. 4) They require that all businesses undertaking such sales file VAT returns to every EU country in which they have a customer. Any errors made on the part of the business will be punished by the authority of the country in question and the business owner will have to deal with that authority and be penalised according to that country’s laws. 5) In order to comply with these new rules businesses must keep at least two, and in some circumstances three, pieces of evidence to prove the location of their customer to support their decision on which country to pay VAT to. These records will have to be kept for at least 10 years. 6) All businesses obliged to follow these new regulations must be registered for VAT and have all systems in place to meet the requirements by 1st January 2015. The problems with these new regulations are complex and many, but here are the main ones for you. There may well be others yet to identify, in which case, god help us!! 1) HMRC have spectacularly failed to inform those small businesses affected by these new regulations of the conditions they must meet by 1st January 2015. The rules were agreed six years ago. Those registered as self-employed small business owners have not once received any information from them about this massive change in regulations with which they are legally bound to comply. When questioned about this HMRC have admitted they didn’t realise so many small businesses would be affected and had only been advertising the changes, via a series of roadshows, to those businesses already VAT registered. They seem to have assumed that all businesses subject to these changes have significant resources and infrastructure with which to implement them. In fact thousands upon thousands of sole traders and small businesses lack even the financial resources to employ an accountant and must manage all aspects of business administration themselves. This is an outstanding demonstration of gross incompetence on the part of HMRC and will be very interested to know if anyone will be held to account for this catastrophic mess and face disciplinary measures. Clearly there is someone out there who has failed to do their job. Yet if failing to inform HMRC of relevant information small business owners face a financial penalty. What penalty do HMRC staff face when they make such catastrophic errors? 2) The description of an ‘e service’ being one in which the sales process is fully automated without any human intervention will cover every musician selling digital downloads from their web site, every person selling an e book, video or audio from their web site, including those whose main type of business is not digital but who provide one or two digital products for their customers. It also includes everyone selling software downloads, knitting & sewing patterns, pictures and images. The list is endless. HMRC estimated that about 40,000 businesses would be affected. Independent assessments have put the figure in the region of 250,000 or more. 3) In order to manage the complexities of paying VAT in a number of different countries businesses can register for VATMOSS which will enable them to make one payment which will then be distributed according to the location of their sales in the previous quarter. However, should there be any problems with payments such as another country disputing how much VAT is owed, the individual will have to deal with the authorities in that country themselves, under the VAT rules and regulations of that country. Did you know that the Hungarian authorities require all correspondence in the Hungarian language? 4) An alternative to registering for VATMOSS will be for small businesses to use third party platforms to sell their products, such as Amazon. In this situation the platform will be responsible for VAT compliance issues. However, the commission charged for sales through their sites is far higher than that charged by payment gateways such as PayPal which one can use to sell through one’s own web site. Thus small businesses will lose significant revenue as a result of being made to use these platforms to avoid falling foul of these ridiculously complex and unwieldy rules. 5) Should a small business decide to continue selling through its own web site it must put in place a payment system which will charge VAT according to the location of the buyer. This would require a very sophisticated payment gateway which, as yet, does not seem to exist. PayPal seems to have washed its hands of this issue saying that it is up to each small business to sort out. HMRC have confirmed that there is no expectation that such payment gateways should be responsible for the process, it is down to the small business in question. 6) As mentioned above, in order to comply with the new VAT regulations businesses must collect two and sometimes three pieces of evidence to prove the location of the customer. This condition is virtually impossible for any small business to meet. When you use a payment gateway such as PayPal you receive the customer’s address, That is all. This constitutes one piece of evidence. HMRC have stated additional evidence could take the form of the address of the customer’s bank, the country to which their payment card is linked or their IP address. None of these are things that a small business using a payment gateway will have any access to whatsoever. There is no way many can possibly comply with this legal requirement. Let alone the need to store this information for every single purchase for ten years. This kind of data storage is way beyond the capabilities of many small businesses who are often functioning out of a spare bedroom or, as in the case of a friend, from a caravan! There is still immense confusion over whether this level of data collection will necessitate the business registering with the Information Commissioners Office as a data controller, which would entail another whole raft of policies and procedures to adhere to. HMRC have still been unable, at the time of writing, to confirm whether of not this will be the case, despite the fact that small businesses now have less than a month to achieve compliance. Given that HMRC have been unable to identify the existence of all the small businesses subject to these regulations despite the fact we have all registered with them, it seems something of an irony that those same small businesses are expected to collect complex location information about each and every customer across international borders and will be punished if they fail to do so. However it is a monumental task collecting this data. And of course, it must be collected for every customer, not simply those in the EU, because we will need to prove that certain sales are NOT subject to these new rules as much as we will need to demonstrate for those in the EU, their actual location. 7) These regulations actively discriminate against women and disabled people who are in the majority in small home run businesses which allow the flexibility to meet caring responsibilities and manage health problems. Yours sincerely,
Posted on: Thu, 11 Dec 2014 15:02:02 +0000
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