Reprieve for small businesses affected by new EU VAT laws

Businesses affected by the change in EU VAT regulations have been given until 30 June 2015 to ‘adapt their websites to meet the new data collection requirements.’

This ‘transitional period,’ announced by HMRC, is aimed at businesses selling digital services to other EU member states.

VAT charges dependent upon consumer location

New laws state that rather than the VAT on digital products being dependent on the country it is being sold in, it is dependent upon the consumer’s location.

The change in EU VAT on digital products was changed initially to stop companies from residing in certain countries to either avoid or decrease the VAT they had to pay. Luxembourg, for example, was a popular choice for relocation.

Small business owners, however, are worried about the new legislation, fearing that it may have a detrimental impact on their digital EU sales. A major concern is administration costs, which would include adapting their websites to alter the VAT for each consumer’s product and to provide proof of their place of supply.

HRMC VAT Moss

To combat concerns, HMRC set up VAT MOSS, an online service aimed at helping small businesses comply with the regulations. Signing up to this service means that digital service suppliers won’t have to singlehandedly register for VAT in every EU state.

HMRC provided the following guidance;

“Until 30 June 2015, micro-businesses that are below the current UK VAT registration threshold, and which register for the VAT MOSS online service, may base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment-service provider. They do not need further information to be supplied directly by the customer.”