Questions on VAT + supplementals Qs for EU VAT

Thresholds for UK VAT, EU Borders, Digital Services

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I run an online website, which provides a B2C subscription service (statistical information and online tools for research). For the past few years the business has traded under the VAT threshold but it is likely to go above it in the next 3 months. I would like it to continue to stay under the threshold.

Thresholds

Q1. The current threshold is £83,000. I appreciate there is no crystal ball but is it likely that next year this could increase by more than the usual £1,000? e.g. in most years it increases by a small amount and then a few years later it increases by many thousands. Presumably this is to catch up from changes in inflation, or due to timing of elections?

Q2. If the threshold is exceeded at the end of February (say £83,500 for the 12 month period from March 2016 to February 2017), but the Budget increases the threshold to £84,000 from 31st March 2017 is there a requirement to register?

Q3. Is it perfectly valid to close the shop doors in order to not go over the threshold? e.g. If on 28th February sales are on £82,900 could customers be told to 'sorry we are closed, please come back 1st March'

EU VAT - Non Digital Services

IMO this business does not qualify as a digital service and thus does not need to comply with EU VAT / VATMOSS. This is based on the advice I was given and information gleaned from two years ago. I appreciate some may wish to poke this with a stick but for now please assume that the current EU VAT for digital services does not apply.

Q4. Assuming we did register for VAT (as a non digital service). What is the position for sales to customers in EU countries. How is it accounted for and how is VAT rates applied? I understand that for Digital Services there are different rates, and that VATMOSS would be useful for distribution but what about non digital services.

e.g. ACME Handbags sells handbags for £10 in the UK If ACME was then VAT registered they would sell for £10+20%VAT in the UK and pay the appropriate VAT to HMRC each quarter. What if there were sales to Greece, Spain, Denmark, Holland? Is it still charge all customers £10+20% VAT and pay HMRC the appropriate net?

EU VAT - Eventually All Businesses

Q6. The EU VAT for Digital Services model will eventually be rolled out to all businesses, correct?

Q7. Pierre Moscovici latest proposal states that there will be a cross border sales threshold of €10k. Is this per country or total?

e.g. ACME Handbags sell £5000 worth of handbags to France, £5000 to Ireland, £2000 to Italy. Total €14,000 but no more than €6000 to any one other EU country.

Replies (4)

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Scalloway Castle
By scalloway
31st Dec 2016 10:54

Q1. This is the official line on increasing the VAT threshold

https://www.gov.uk/government/publications/vat-revalorisation-of-registr...

Q3. Closing down for a period to avoid VAT registration is a possible option. Remember the VAT threshold is calculated on a 12 month rolling figure you need to do some sums to work out how long you need to close down. You should also consider the consequences of customers not returning after closedown.

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Replying to scalloway:
avatar
By Prophet-5
31st Dec 2016 20:33

scalloway wrote:

Q1. This is the official line on increasing the VAT threshold

https://www.gov.uk/government/publications/vat-revalorisation-of-registr...

Q3. Closing down for a period to avoid VAT registration is a possible option. Remember the VAT threshold is calculated on a 12 month rolling figure you need to do some sums to work out how long you need to close down. You should also consider the consequences of customers not returning after closedown.

Q1. Reading that gov piece just states the 15/16 figure will increase by inflation; from £82,000 to £83,000. It's a bit vague and ambiguous.

Q3. As given in the example ACME would just shut the store for one or two days once the 12 month (11 month and 27 days in Feb for example) reaches say £82,900. They can deal with any loss of customers; it's just a check to confirm it is not something that is frowned upon.

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Replying to Prophet-5:
Scalloway Castle
By scalloway
31st Dec 2016 21:04

You would need to check again coming up to the end of the next month that £83,000 isn't going to be reached in that 12 month period. It isn't a once a year check.

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By Prophet-5
16th Mar 2017 17:04

Unbelievable. My application to register for VAT was rejected due to lack of evidence that I am running a business. HMRC want proof of tenancy of office, copies of bank statements. What a complete joke and waste of time.

* Went over the £83,000 registration threshold at the end of Jan 2017
* Feb 11th raised prices in anticipation (because VAT is back dated even though you don't charge VAT yet)
* Feb 21st applied for VAT registration with a starting date of 28th Jan (the day we went over £83,000 to the exact calendar year)
* Shortly after HMRC reject the application.

Since increasing prices our sales have dropped significantly. We're £4K down in the same 4/5 week period last year.

With the 2017 budget increasing the de-registration limit and our sales tanking I project turnover for 12 months rolling to now be this:

Apr16-Mar17 £82,500
May16-Apr17 £81,000
Jun16-May17 £77,000

Those figures are well under the de-registration threshold.

Of course we could just be having a bad 4/5/6 weeks, and things may pick up. If we revert back to our lower (non VAT increased prices) that could increase trade again. But if trade did turn out to be the same as last year we would still be hovering around £81-£82,000 which is still under the de-registration threshold.

~~~ Options ~~~

1. Ignore this. Forget it ever happened. We are now under the £85,000 registration threshold and are unlikely to go near it. Put prices back down to what they were and reel back that red tape.

2. Send HMRC what they want. Register as originally planned. On the day we get the certificate immediately de-register. Have a few days of being wrapped in red tape but look forward to the day of de-reg and less hassle again.

3. Concentrate on sales. Register for VAT, stay registered and thrive to increase trade so that the paper work is worth it (or you earn enough to pay someone to deal with this specific red tape and paper work).

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