"Molly Scott Cato, Green MEP for South West England, has welcomed the U-turn by the Commission on the question of the exemption from VAT changes that have been so destructive to small digital businesses in the UK. Dr Scott Cato was the first British MEP to take seriously the threat to small businesses from the VAT changes introduced on 1 January and has repeatedly lobbied the Commission to make such a change.
The new regulations were designed to prevent multinational corporations from avoiding tax on digital sales in other countries. However, the changes have had a devastating impact on some of the South West’s micro-businesses and mean that VAT on digital products sold in the EU are chargeable in the place of purchase rather than the place of supply. This means micro-businesses are obliged to collect VAT from up to 28 different EU states at 75 different rates.
News of the change of heart by the Commission came in response to a written question sent from Molly Scott Cato’s office. Mr Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, said that the Commission was working to minimise burdens attached to cross-border e-commerce arising from different VAT regimes and to introduce a VAT exemption threshold for start-up companies in respect of their EU sales. Dr Scott Cato said:
“I am delighted to hear that the commission is now planning to offer a life line to the small businesses who sell digital products and services across the single market. The VAT changes were heavy-handed and poorly thought through. It was dreadful to see new and promising small businesses being so negatively affected and I am glad they look set to be exempted from the VATMOSS system. I am aware, however, that this news comes too late for many small businesses, and will continue to press for them to be compensated.”
Talis Kimberley, who runs a digital micro business based in Swindon, said:
“This is very promising indeed – but micro-businesses need that threshold now, and it should not be limited to start-ups but should include tiny businesses however long-established.
“I’m grateful to Molly Scott Cato for taking this up and working to help the thousands of people affected by these changes brought in almost a year ago. There are a great many micro businesses which are apparently invisible to those who created this legislation. Sadly, many such businesses have been forced into the arms of larger platform; to constrain their geographical sales, or in some cases cease trading altogether.”
There is no realistic way of applying such a threshold to electronic transactions. Traders providing electronic services have never, in fact, seriously pursued this issue.
In fact, the VAT exemption for small packages is giving rise to an increasing amount of market distortion with the increase in distance sales that has been facilitated by the Internet, and it is currently under review. The exemption is limited to goods the total value of which does not exceed €22. Member States also have the option of excluding from the exemption goods that are imported by mail.
Moreover, the exemption applies to the tax chargeable at import on physical goods and it is the purchaser who benefits from the threshold. The exemption, which runs counter to the fundamental principle of VAT as a broad-based tax on consumption, is provided for practical reasons to avoid the need to collect small amounts of tax from private consumers. This does not apply to digital services where the tax will be collected by suppliers.
The reason why traders (small) have never seriously pursued the issue is because HMRC and the Treasury didn't properly consult them.
Re the VAT Doctor above, this is either another example of HMRC's duplicity or stupidity. EU law defines what is a taxable person and responsibilities, not Whitehall. I can see no evidence that the UK has applied for a derogation so that a business will be defined as a taxable person for MOSS and not for UK VAT. I wonder how other member states dealt with this problem - anyone know a member of the EU VAT Committee?
In case you think duplicity is a harsh word to use, consider this. I recently represented a client at the VAT Tribunal on the issue of whether the teaching of yoga by an independent teacher fell within the scope of the exemption for education. During the hearing I pointed out that HMRC had given such treatment to golf. At this point, the judge asked them why? HMRC's barrister was clearly shaken by this turn of events and asked for a recess to discuss the matter with his officials.
Returning to the point, s3 VATA defines what is a taxable person and s4 states that taxable persons will be kept on a single register. Paragraph 1 of Schedule 11 doesn't give them the power to define a new "class" of taxable person. Schedules 1 to 3A are the important ones with regard to registration. It looks like these poor little Mosses are going to have to deal with the Vogons after all... and pay £35 to another useless bunch to register under the Data Protection Act.
has lost a slipper and would like to ask Cinderella (Margaret Hodge) if she can borrow one of hers .... and her false teeth.
On a serious note there should be no doubt that the arrangements which were disclosed in the documents leaked to the ICIJ were deliberately set up to avoid paying corporate taxes in the jurisdictions where the trade took place and the taxable profits were generated. So, for example, the consequence for the UK is that HMG has to make up for this "lost" tax revenue somehow and does so by clobbering SMEs and the small people who have no means of escape. And the tax haven, whether it be the Celtic pussycat or Luxembourg, benefits from the albeit small amounts of additional tax revenue and economic activity. This is important to them given that nobody but Johnny Foreigner would want to live there - because of the snakes (Jean-Claude Juncker).
Should have read the post more throughly. I realise now it is about whether international companies should pay their taxes in the jurisdictions where they trade or whether, with the help of slimey accounting toves, my granny should while away the last years of her life in some suppurating puss of a horror in some arsepit care home in the North of England. I am sure my granny will be pleased that she has the full support of the accountancy profession. As it is all hypothetical, the arsepit could also be in the West of England, the Midlands, the East, the South or even mobile on your high speed train to the Great Arsepit. If you need a letter from the Luxembourg tax authorities and the Irish (or the Maltese) absolving you from any obligations to humanity, drop me a line and I'll say YES. Nothing dodgy about foreign governments - we always say YES.
I used to work for PW in the International Tax Consultancy before they merged with Coopers and Lybrand. I always understood that PW were the "Gentleman's firm" and Coopers were up to their neck in anythng they could get from a Government Minister. Maybe I am wrong. Name and address withheld. Although I am thinking about licensing my IP to somewhere else, maybe a small country where they like coffee, books, CDs brass plates etc.
This is just another abject example of what you are prepared to tolerate. There is no confusion. If a bank had failed to communicate with me regularly over a debt I could approach the regulator. In any commercial circumstances it is inconceivable that somebody could sit on a debt that is growing like this without telling you about it until the end of three months, and then possibly take you off to the bankruptcy courts (I am told that HMRC will do this for £750). It may well not be a debt. HMRC are using penalties and their collection powers against small people like another tax. He should appeal to the European Court of Human Rights. If he needs help, get in touch.
Also while I have your attention discussing this HMRC pile of garbage I listened to a conversation on Radio 4 today where an innocent who wanted to register for MOSS, OSS or TOSS rang that automated voice recognition system and when it said mention something he said " I want to register for MOSS" and it said "so you want to import a car". As a taxpayer I am paying for all this rubbish so when they ask PWC, EY, KPMG, BDO etc with clients located in Luxembourg: "oh, by the way, do you have any clients who can help me with an answering service?", they didn't ask me or any of my clients who make money and pay taxes in this country.
It's nearly Christmas and I have to find out how the local Brighton food banks are doing.
I fully appreciate the comments which have been made above, but the "smelling the coffee" principle remains that the only reason why anybody would move from the current hybrid system on VAT in the EU to a new destination system, without harmonisation of the member states VAT rates, whether on goods or services, is because they are nuts, and as a result of a pile of conversation from a bunch of [***] from the UK Treasury for the very reasons I gave you above. For example, I have a business in the US, pretty big, and I use PWC to advise where I should locate to sell either goods or services? Where do I go - Luxembourg.!! Why? Because the corporation tax rates are low. On VAT on services who the hell else do you think are interested? French? Not the international language of business. Greece? Rumania, Poland, Czech Republic, Germany. OK, maybe the Irish. Do you think for one second that the UK is not in the Commission offices every day duscussing, pensions, farming, banking regulations, insurance, VAT and the size of your Christmas Turkey? Why do you put up with all this crap? Maybe we will reach the stage (and I am not allowed to practise in France) when all your efforts from "working together" will be worthless because some dude from Scotland will be able to charge £100 for what you currently charge £500. Interesting idea. I am totally in favour of grouping together and stopping all of this madness - across the whole area of taxation. Who is with me?
My answers
VATMOSS U-turn (in part)
"Molly Scott Cato, Green MEP for South West England, has welcomed the U-turn by the Commission on the question of the exemption from VAT changes that have been so destructive to small digital businesses in the UK. Dr Scott Cato was the first British MEP to take seriously the threat to small businesses from the VAT changes introduced on 1 January and has repeatedly lobbied the Commission to make such a change.
The new regulations were designed to prevent multinational corporations from avoiding tax on digital sales in other countries. However, the changes have had a devastating impact on some of the South West’s micro-businesses and mean that VAT on digital products sold in the EU are chargeable in the place of purchase rather than the place of supply. This means micro-businesses are obliged to collect VAT from up to 28 different EU states at 75 different rates.
News of the change of heart by the Commission came in response to a written question sent from Molly Scott Cato’s office. Mr Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, said that the Commission was working to minimise burdens attached to cross-border e-commerce arising from different VAT regimes and to introduce a VAT exemption threshold for start-up companies in respect of their EU sales. Dr Scott Cato said:
“I am delighted to hear that the commission is now planning to offer a life line to the small businesses who sell digital products and services across the single market. The VAT changes were heavy-handed and poorly thought through. It was dreadful to see new and promising small businesses being so negatively affected and I am glad they look set to be exempted from the VATMOSS system. I am aware, however, that this news comes too late for many small businesses, and will continue to press for them to be compensated.”
Talis Kimberley, who runs a digital micro business based in Swindon, said:
“This is very promising indeed – but micro-businesses need that threshold now, and it should not be limited to start-ups but should include tiny businesses however long-established.
“I’m grateful to Molly Scott Cato for taking this up and working to help the thousands of people affected by these changes brought in almost a year ago. There are a great many micro businesses which are apparently invisible to those who created this legislation. Sadly, many such businesses have been forced into the arms of larger platform; to constrain their geographical sales, or in some cases cease trading altogether.”
Grammar
I would only on rare occasions start a sentence with "However, but", but......
Oh Clare....
If you want to read the Commission's stance on this then you can find it here.. http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/article_1610_en.htm#a1
This paragraph is enlightening:
Why is the VAT exemption for small consignments (containing physical goods) not also applied to digital services so as to ensure equity?
There is no realistic way of applying such a threshold to electronic transactions. Traders providing electronic services have never, in fact, seriously pursued this issue.
In fact, the VAT exemption for small packages is giving rise to an increasing amount of market distortion with the increase in distance sales that has been facilitated by the Internet, and it is currently under review. The exemption is limited to goods the total value of which does not exceed €22. Member States also have the option of excluding from the exemption goods that are imported by mail.
Moreover, the exemption applies to the tax chargeable at import on physical goods and it is the purchaser who benefits from the threshold. The exemption, which runs counter to the fundamental principle of VAT as a broad-based tax on consumption, is provided for practical reasons to avoid the need to collect small amounts of tax from private consumers. This does not apply to digital services where the tax will be collected by suppliers.
The reason why traders (small) have never seriously pursued the issue is because HMRC and the Treasury didn't properly consult them.
Staggering
Re the VAT Doctor above, this is either another example of HMRC's duplicity or stupidity. EU law defines what is a taxable person and responsibilities, not Whitehall. I can see no evidence that the UK has applied for a derogation so that a business will be defined as a taxable person for MOSS and not for UK VAT. I wonder how other member states dealt with this problem - anyone know a member of the EU VAT Committee?
In case you think duplicity is a harsh word to use, consider this. I recently represented a client at the VAT Tribunal on the issue of whether the teaching of yoga by an independent teacher fell within the scope of the exemption for education. During the hearing I pointed out that HMRC had given such treatment to golf. At this point, the judge asked them why? HMRC's barrister was clearly shaken by this turn of events and asked for a recess to discuss the matter with his officials.
Returning to the point, s3 VATA defines what is a taxable person and s4 states that taxable persons will be kept on a single register. Paragraph 1 of Schedule 11 doesn't give them the power to define a new "class" of taxable person. Schedules 1 to 3A are the important ones with regard to registration. It looks like these poor little Mosses are going to have to deal with the Vogons after all... and pay £35 to another useless bunch to register under the Data Protection Act.
My Granny
has lost a slipper and would like to ask Cinderella (Margaret Hodge) if she can borrow one of hers .... and her false teeth.
On a serious note there should be no doubt that the arrangements which were disclosed in the documents leaked to the ICIJ were deliberately set up to avoid paying corporate taxes in the jurisdictions where the trade took place and the taxable profits were generated. So, for example, the consequence for the UK is that HMG has to make up for this "lost" tax revenue somehow and does so by clobbering SMEs and the small people who have no means of escape. And the tax haven, whether it be the Celtic pussycat or Luxembourg, benefits from the albeit small amounts of additional tax revenue and economic activity. This is important to them given that nobody but Johnny Foreigner would want to live there - because of the snakes (Jean-Claude Juncker).
OOPS again
Should have read the post more throughly. I realise now it is about whether international companies should pay their taxes in the jurisdictions where they trade or whether, with the help of slimey accounting toves, my granny should while away the last years of her life in some suppurating puss of a horror in some arsepit care home in the North of England. I am sure my granny will be pleased that she has the full support of the accountancy profession. As it is all hypothetical, the arsepit could also be in the West of England, the Midlands, the East, the South or even mobile on your high speed train to the Great Arsepit. If you need a letter from the Luxembourg tax authorities and the Irish (or the Maltese) absolving you from any obligations to humanity, drop me a line and I'll say YES. Nothing dodgy about foreign governments - we always say YES.
OOPS
I used to work for PW in the International Tax Consultancy before they merged with Coopers and Lybrand. I always understood that PW were the "Gentleman's firm" and Coopers were up to their neck in anythng they could get from a Government Minister. Maybe I am wrong. Name and address withheld. Although I am thinking about licensing my IP to somewhere else, maybe a small country where they like coffee, books, CDs brass plates etc.
Totally wrong
This is just another abject example of what you are prepared to tolerate. There is no confusion. If a bank had failed to communicate with me regularly over a debt I could approach the regulator. In any commercial circumstances it is inconceivable that somebody could sit on a debt that is growing like this without telling you about it until the end of three months, and then possibly take you off to the bankruptcy courts (I am told that HMRC will do this for £750). It may well not be a debt. HMRC are using penalties and their collection powers against small people like another tax. He should appeal to the European Court of Human Rights. If he needs help, get in touch.
MOSS and the VAT helpline
Also while I have your attention discussing this HMRC pile of garbage I listened to a conversation on Radio 4 today where an innocent who wanted to register for MOSS, OSS or TOSS rang that automated voice recognition system and when it said mention something he said " I want to register for MOSS" and it said "so you want to import a car". As a taxpayer I am paying for all this rubbish so when they ask PWC, EY, KPMG, BDO etc with clients located in Luxembourg: "oh, by the way, do you have any clients who can help me with an answering service?", they didn't ask me or any of my clients who make money and pay taxes in this country.
It's nearly Christmas and I have to find out how the local Brighton food banks are doing.
Merry Christmas guys.
With all due rspect
I fully appreciate the comments which have been made above, but the "smelling the coffee" principle remains that the only reason why anybody would move from the current hybrid system on VAT in the EU to a new destination system, without harmonisation of the member states VAT rates, whether on goods or services, is because they are nuts, and as a result of a pile of conversation from a bunch of [***] from the UK Treasury for the very reasons I gave you above. For example, I have a business in the US, pretty big, and I use PWC to advise where I should locate to sell either goods or services? Where do I go - Luxembourg.!! Why? Because the corporation tax rates are low. On VAT on services who the hell else do you think are interested? French? Not the international language of business. Greece? Rumania, Poland, Czech Republic, Germany. OK, maybe the Irish. Do you think for one second that the UK is not in the Commission offices every day duscussing, pensions, farming, banking regulations, insurance, VAT and the size of your Christmas Turkey? Why do you put up with all this crap? Maybe we will reach the stage (and I am not allowed to practise in France) when all your efforts from "working together" will be worthless because some dude from Scotland will be able to charge £100 for what you currently charge £500. Interesting idea. I am totally in favour of grouping together and stopping all of this madness - across the whole area of taxation. Who is with me?
John
VATworld.co.uk