A vote to LEAVE the EU in the Referendum will not solve the EU VATMOSS issue!

You might recall that I was particularly vocal about the #EU #VATMOSS issue last year... if not then a look back through the blog will fill you in on what I was saying...  but as we approach the EU #Referendum. it's worth flagging up how the REMAIN / LEAVE votes relate to the issue of VAT on cross-border digital sales within the EU.

You might think that if we vote LEAVE then all our woes will end and VATMOSS will no longer be an issue for micro-businesses...   and you would be wrong!

In fact, a vote to LEAVE would make the situation even worse for small traders... 

Clare Josa (co-founder of the EU VAT Action Campaign and one of the team which took up the issue of how VAT on digital cross-border sales was hurting small businesses) explains why...

http://www.dancinginyoursoulshoes.com/will-happen-eu-digital-vat-leave-eu-10-popular-myths-debunked/

Does the Labour Campaign for the Self Employed give us a glimmer of hope?

The creation of the Labour Campaign for the Self Employed has given hope to many sole traders and micro-businesses that their concerns may at last find a champion. I am hoping that the Campaign will address the issues that face us in respect of VAT changes affecting digital cross-border sales. This is the message I have sent to the campaign today: 

The imposition of impossible EU regulations such as the VAT scheme for digital cross-border sales that came in on 1st Jan 2015 is a problem for us. It is impossible to comply with in many cases and is putting sole traders and micro-businesses at a huge disadvantage and driving trade back to the big guys like Amazon, as the smaller traders simply cannot meet the requirements of the rules at any price!

The EU has accepted that small traders being hurt was an unforseen and unintended consequence of the new rules, and that it was never the EU's plan to affect us, as according to the EU they simply did not know that we would be affected at all. The assumption appears to have been, "Don't you all sell via Amazon or eBay anyhow?" - No we do not!

For any sole trader or micro-business that sells cross-border digital products directly from its own website the initial costs of the changes required to the website are anything up to £4,000 to make the website capable of collecting the proof needed, and even then we cannot guarantee the data that we have to collect from the buyer.

The change was intended to prevent the big guys like Amazon and eBay from routing their sales via the country with the lowest VAT rate (i.e. Luxemburg mainly).  The irony is that the new rules are forcing many of us to sell via the big guys now as they can meet the new rules, whereas we cannot.

Whilst previously we would have had to charge VAT on digital cross border sales at the UK rate only if our turnover exceeded the £81,000 VAT threshold for domestic sales, now we have to charge VAT at the rate in the buyer's country and there is no threshold for digital cross-border sales, so even if we sell a music mp3 or an ebook or a knitting pattern for less than a £1 we have to register under the scheme and collect the VAT and pay it on to the buyer's tax authority.

To do so we have to *prove* where the buyer is based and calculate the VAT rate for that country and charge the buyer the relevant rate for the goods purchased (one of 70+ rates in 28 countries), and then remit the VAT to that country either directly or via one of the MOSS schemes that has been set up by different country tax authorities.

The proof we can accept includes an IP address, but this is not reliable evidence of geographical location in many cases and can be spoofed by buyers or reported incorrectly depending on how the buyer is connecting to the website to buy.

The UK government could unilaterally suspend the new rules until the EU gets the issue sorted and brings in the promised small turnover threshold but despite being asked to do so it has not. The threshold could take a couple of years to arrive as it has to be discussed and agreed by all EU member states, meanwhile we are struggling with trying to comply, or we can simply refuse to sell outside the UK (which also falls foul of another EU requirement about free trade across the EU!)

Meanwhile, you can keep up to date with progress of the threshold over on the website of the EU VAT ACTION CAMPAIGN

In or out? The EU I mean...

Last night saw us forsaking the BBC's new series of Dr Who and heading northward to the Marchesi Centre in Windermere where Julie Ward, MEP, was to address a public meeting organised by the Westmorland and Lonsdale Constituency Labour Party.

It was perhaps optimistic to expect a large turnout on a Saturday night but, although few in number, we made up for that in interest and enthusiasm, and were joined by four visitors from the Fylde who had travelled some 45 miles to attend the meeting.

Julie, who is a fairly new member of the European Parliament - elected in May 2014, is one of eight MEPs that represent the North West Region - three of whom are members of the European Parliamentary Labour Party. Her particular interests include culture, education, children, and gender equality and she is an active campaigner for equal rights and social justice.

A broad-brush explanation of how the EU works set the scene for us, with lots of detail about the political groups which operate in the EU (instead of along party lines as in the UK parliament), and how much of their work is carried out in the 20 committees that each cover a specific area of interest or policy making. She gave examples of how her own work on Committees has affected and improved the lives of individuals and groups, and described the impressive translation system which can service members from the 28 different nations in the EU simultaneously.

A lively question and answer session followed, covering issues such as the Greek financial crisis, the planned TTIP (Transatlantic Trade and Investment Partnership) deal, and this year's changes to the way VAT is collected on digital cross-border sales and its impact on low turnover businesses and sole traders.

One of the things I came away with was a much better understanding of how the UK benefits from its membership of the EU, and how much we stand to lose if we leave it.  From legal protections to jobs, much will be undermined or removed if we opt out of Europe in the Government's planned referendum.