Enterprise Nation hosted a meeting between the main protagonists of the #VATMOSS campaign and high ranking officials from HMRC earlier today.
HMRC chiefs, including Financial Secretary to the Treasury David Gauke, heard the compelling concerns raised by those set to be affected by the EU VAT legislation, due to start in just under a month's time.
The group told the Minister there were four main points they wanted to be re-considered by HMRC and the EU Commission. These were:
- A de minimis level where businesses under Â£81K turnover would be exempt from the new EU VAT rules on place of supply for digital services, removing the administrative burden and avoiding tens of thousands of them having to close.
- A re-consideration of the data provision element of the legislation that would otherwise require micro-firms to retrieve and keep hold of sensitive data for ten years on their home laptops. In particular, for UK micro businesses to be exempt from the 2 pieces of information for proof of place of supply and instead to be able to use just the customer's self-declared address.
- A consideration of the burden of VAT compliance placed on small platforms and marketplaces. Many are run by micro firms themselves and couldn't comply with the burden.
- A clearer explanation of the digital products that will be affected - such as e-books, knitting patterns, music, artwork, photos, how-to-guides
The group claimed there were many small firms that would be unable to trade as a result of the changes next year, partly around the issue of data collection and the qualification of micro-firms to legally store sensitive data for ten years, as well as the cost of compliance.
Clare Josa is an NLP trainer who uses e-books and courses as part of the marketing for her business.
She said: "We're quite convinced HMRC would not have negotiated the EU legislation the way they did had they known the likely impact it would have on so many small businesses. It's like they didn't know we existed. They do now."
She told the Minister she had two choices: either to close her business or she breaks the law.
Juliet KcKenna, novelist, said: "I have contacted my own digital publishing press (Wizards Tower Press) I use to distribute my work and they have confirmed they will be shutting their own online shop for direct sales on 31 December.
"I have also contacted Boo Books, Fox Spirit, Alchemy Press and Kristell In, platforms that market a lot of up-and-coming authors and they have all confirmed they had no idea about the new regulations."
Simon Dunant, founder of New Rise Digital, a firm that produces e-courses, claims small businesses will not be able to comply by January 1 because the software plug-ins they will need to add to their websites have not yet been developed.
He said: "I have been in touch with software companies that make plug-ins for simple Wordpress websites. They have told me they are not going to be able to produce the software in time for January 1."
Mike Cunningham, senior policy adviser at HM Treasury told the group that there was a British tax delegation heading to a meeting in Brussels tomorrow/Friday where the EU VAT legislation was due to be discussed.
He said they now hoped to:
- Ascertain whether any other member states had experienced a similar reaction from micro firms
- Find out whether there is an appetite in Europe for a discussion around thresholds
He pointed out that if there was an appetite, there would have to be an EU Commission proposal and all 28 member states would have to agree.
He added that the UK had raised the issue when the legislation was being debated, but there had been no similar feeling in the rest of the EU states.
Patricia Van Den Akker, director of The Design Trust, said a reaction overseas was less likely because firms in the EU have no VAT threshold.
As the meeting parted and both parties agreed to keep communication channels open, Emma Jones said:
"The weight of feeling has taken HMRC by surprise but we were delighted with their prompt response. We will be working together with them to ensure VAT MOSS does not impact negatively on small businesses."