Run your own website? Sell anything? Beware EU VAT

[Frank_Rizzo]

Do you run your own website and earn income from it?

Sell downloads, such as MP3 files or PDFs?
Run online courses, seminars?
Host a forum and charge a subscription fee?
Run a blog but charge for advertising slots?

From 1st Jan 2015 EU rules are changing and this is serious stuff. Thousands of online businesses - small guys making a few quid. Mums / Dads selling knitting patterns, app writers, online cartoon / book writers. We are all doomed!

If you run your own site that generates income and you make any sale to a non UK EU website even if it is for just 0.01p you have to register for VAT either in the UK, or separately in 28 EU countries.

This is no joke. If you do run your own site, or if you know someone who runs a site please read / share this:

http://euvataction.org/

 

[touch]

Is it really that difficult to become uk vat registered?
It can be done through an online form?

 

[Frank_Rizzo]

You think it's just a form?

£81K Threshold = Safety Net / Buffer for Small Businesses
Hundreds of thousands of businesses (online and bricks and mortar) either do not have enough trade to reach the threshold, or chose not to go above the threshold.

Why? Because VAT will mean their prices have to rise 20% (minus small amount of VAT reclaimed). Because it is a huge administrative burden.

Up until 31st December 2014 we have protection for small businesses with this threshold. We are allowed to earn £1 to £80,999 without the burden of registering for VAT. The next day we have a serious issue.

The VAT threshold for UK sales is upheld, but make any sale from any other EU country and we have to pay that country the VAT.

28 Forms
This means separately registering for 28 different coutries (yeh, it's only forms. Speak greek, slovakian .... ?) We have to charge customers the level of VAT that is current in that country. This is an absolute nightmare.

Now here's where that form filling gets worse. We have to PROVE that customers making the transaction in the country at the time the transaction was made.

Olaf in Slovakia purchases a 99p PDF file. We have to check that he is in Slovakia and thus charge him the correct rate of VAT. At the end of the quarter we have to send Slovakia the VAT on that purchase.

Record Keeping
Even if we only make one sale in non UK EU countries we now have to keep records on all customer transactions for Ten Years.

This means that we have to collect at least 2 (in some cases 3) types of information about the customer

* Name and Address
* IP Address (duhhh, spoofed, VPN, AOL)
* Address of bank account
* Landline number
* Country code of SIM

These have to be kept for ten years and can be requested for audit by any of the 28 member VAT offices. If we make a mistake we can be fined.

Please don't take this lightlly, and please excuse my manner if I sound curt. But this is a serious issue. In a few weeks thousands of online entrepreneurs are going to be forced to shut down as they can not pay for or spare the time to "fill in a form."

 

[simisker]

[...] Why? Because VAT will mean their prices have to rise 20% (minus small amount of VAT reclaimed). Because it is a huge administrative burden.

From what I've just read, while you have to register for VAT if you want to use their 'Mini One-Stop Shop' [MOSS], it does *not* remove the £81k threshold. It still applies to your UK sales VAT, just not your EU sales VAT [there is no EU VAT threshold].

So if you have a turnover of £51k - £50k from UK sales, £1k from EU sales - you only have to pay VAT on the £1k. By all means add 20% to your prices, but in this case you'd only need to add a few % to your prices to make up for the £1k VAT payment.

"Although it is a condition of registering for the MOSS that you must have a UK VAT registration number to identify the business, you will not lose your UK VAT registration threshold."

https://www.gov.uk/government/publi...below-the-uk-vat-registration-threshold-81000

Obviously there are a number of other niggling downsides [the record-keeping being the biggest pain, from what I can tell], but from reading comments across various sites it does seem that a number of people mistakenly believe they forfeit their UK threshold if they sign up to get a VAT number. Just thought I'd mention it

 

[Frank_Rizzo]

yes MOSS is a solution but it's still a dogs breakfast.

1. You have to fill in a quarterly UK return with NIL RETURN on the paperwork. Do you see the nonsense in this? You have to request a form, basically write zero on it, and return it.

2. You still have to record the 2 or 3 non conflicting pieces of evidence that show the country that the person made the purchase from. This means you now have to register with the ICO and be governed by their DP rules: You have to store the data securely in a EU based server (you can't store it on a US server and such).

3. You have to increase your prices in order to cover the extra cost. This means that you have to charge, say, 20% more across the board for compliance (your extra work) and then, another 17-27% for the VAT at each country.

e.g. You are a songwriter and sell your songs as downloads. You charge £10.00 an album and have about 500 customers a year from all over the world.

Previously you just charged £10.00 via something like PayPal and give instant access to the download. The checkout process was easy with few abandoned carts.

You earn £5000 a year, subtract your hosting fees, equipment fees and submit a self assessment tax form to pay any taxes due.

From 1st Jan you now have to

a) identify if they are in the EU (but not the UK) by asking them extra questions, GEOIP them (hey you are a songwriter not a webmaster!)
b) work out the VAT they owe based on the country they are in at the time of purchase (pray they are not on the Euro Star half way across the channel)
c) record that information for ten years.

Bigger companies also have to do all this but they have the resources, staff, money to pay for all this.

Now can you see why thousands of e-entrepreneurs will effectively give up trading on the internet in the next few weeks?

Take a look at #VATMOSS on twitter.