Tamebay talks VAT MOSS with the European Commission #vatmoss

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On Thursday I attended a frustrating media briefing at the EU Commission building in London regarding the impending introduction of VAT MOSS: we’ve written about this before.

In brief, anyone who sells automatic downloads online (such as music, apps, ebooks and the like) will face a whole new VAT regime that is both onerous and deterring. If you sell to other countries in the EU you’ll need to register with the HMRC’s VAT MOSS service, keep data about who you sell to and start paying VAT to HMRC from 1st January even if your sales fall below the current UK Threshold of £81k. And the VAT paid will be at the prevailing rates in the locale of the buyer, not those set by HM Government.

The meeting I attended was a media briefing (and not a lobbying exercise) and unfortunately I cannot name or attribute any comments to the various officials. But suffice to say those from the EU and HMRC were there to sell the benefits of this change. They were keen to remind us that:

– It will raise some cash for our national coffers. Maybe £1bn for the UK over three years.
– It levels the playing field for SMEs across the EU. (Although is clearly detrimental to those in the UK.)
– It’s an easy bit of regulation to comply with.

I was alarmed by several comments from the European Commission attendees who had come over from Brussels to talk VAT MOSS up. Firstly, they argued that collecting two pieces of data (to confirm the location of the buyer) to comply with VAT Moss was straight forward. I disagree with that and consider it both non-trivial and time-consuming.

Secondly, the EU Commission attendees from Brussels were clear that, in an ideal world, the VAT MOSS rules should apply to even physical goods sold from the UK. Let’s be clear what that would mean: UK sales made to buyers in an EU member state should be taxed on a similar basis and VAT, as a matter of principle, should be charged at the local VAT rate of the buyer not the seller.

That would have a huge impact on the hundreds of thousands of UK ecommerce sellers who sell within the EU were it to come into force.

On a positive note, I do think that the HMRC attendees there understood that compliance does represent an administrative challenge and they want to smooth that out. The actual interface of the HMRC VAT MOSS dashboard will be critical there and it hasn’t yet launched. We will be interested to see if it is as easy to use as HMRC claim.

But the crux of the matter is twofold. This is a measure that will stifle many thousands of small businesses and kitchen table start-ups in the UK and it will discourage cross-border trade within the EU by UK sellers of download items. It’s punitive ‘red tape’.

Let’s be very clear on Tamebay’s stance here:

– The VAT threshold for SME sellers should stand for digital goods as it stands for physical sales. If you sell less than £81k, you should have the choice to continue selling within the EU on the same basis as sellers of physical goods under that threshold.

– The HMRC should delay implementation of VAT MOSS until the dashboard is up and ready and proper lobbying against this change has had the opportunity to take its course.

To make a personal observation, I was surprised by the attitude of the EU Commission people at this meeting. There was a sense that those who spoke out against it (as I did) might somehow simply misunderstand the situation or be maybe be ill-informed. I don’t consider myself to be either in this case.

Emma Jones from Enterprise Nation has been using her government/Conservative connections to talk to those in Brussels, as she reported yesterday on the EN blog.

My key impression from the EU Commission people I met is that there is only a slim chance of making VAT MOSS as it stands fairer for SMEs in the UK who sell digital products. Not least because they wish to extend it to physical goods if they can in due course.

Wedge. Thin end of.

17 Responses

  1. ok I have only been been taking odds and sods in on this, as It does not concern me.

    However surely as a digital media supplier you are more or less re-locatable. Just register the business in a non EU country. (hong kong sounds ok lol )

  2. I know so little about VAT that I was uncertain whether to make comment or not. However I am curious and was wondering if anybody knows the answers to my question.
    Any seller of physical products registered for VAT in the UK can claim back VAT on the products purchased for resale and VAT on many other business purchases. If a digital product seller is paying VAT on digital products sold within Europe but otherwise is not UK VAT registered can they then claim back VAT on UK business purchases i.e. the PC they typed their book on?

  3. Hi Tamebay Team,
    There’s plenty going on behind closed doors and in public that is making progress. And there is still plenty that each and every one of us can do to create the changes we so desperately need.

    Thank you for feeding back on the briefing.

    Would you mind if we share the link for the latest update on the campaign with your readers? Please delete this comment if not!


    Clare & the EU VAT Action Team

  4. As I don’t sell digital products this doesn’t affect me – yet. However, if they started doing this with physical goods, like I do sell, I would simply stop selling to European countries. Granted, it would knock out about 20% of my sales…..

    Hey, just had a thought: does selling to the UK count as selling to Europe?

  5. It is already affecting more than cross European border sales. USA and Australia based designers are already seeking ways to block customers from the EU from purchasing their pdf products. Plus customers, put off by all the red tape are simply opting to buy outside of the EU. So micro businesses are facing a double blow. First the difficulties in complying, secondly a very real loss of business. This is not creating a level playing field… at all.

    If This goes forward to include all products and the VAT collectors stick true to their word to aggressively pursue non compliance, a lot more than micro businesses will suffer within the EU.

  6. lets be honest
    its illegal to speed or smoke weed they simply cant prosecute everyone for everything


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