Downing Street to tackle EU VAT for small UK companies
Posted on in Business News , Creative News, Political News
Anyone who provides digital services to consumers in other European Union member states will now have to pay VAT in that country.
David Cameron has announced that he plans to tackle the new European laws surrounding VAT on digital services amid concerns the changes could force thousands of small businesses to close.
This announcement comes as many small and micro businesses fear they will not be able to comply with the new legislation aimed at making internet giants such as Amazon pay more tax.
This has hit many of Britain's arts and crafts entrepreneurs selling patterns online, as these are considered downloads.
The law came into force on January 1st, and means that VAT is no longer charged according to where the seller is based - now it must be levied at the rate of the country where the customer is.
To comply with the new law, business owners must register for VAT (even if their turnover is less than the UK's £81,000 threshold) with each country they sell to, and with 28 countries in the EU with 75 different VAT rates, the costs and administrative burden could be enormous.
Downing Street officials said the UK prime minister intends to raise the issue directly with the president of the European Commission. He will also ask the commission to bring forward proposals to address the problem this summer.
"These rules, while bringing some benefits by removing distortion in the market, are adversely affecting small businesses," a Downing Street official said. "It is a classic example of where the EU needs to be flexible and fast-moving, coming up with a fix before EU red tape has a detrimental effect on traders across Europe."
64% of the smallest British businesses said the changes were having a negative impact, according to a recent survey, while one in 10 warn they will have to close.
Have the legislation changes impacted on your business? If so, we'd like to hear from you - leave a comment below and share your experience.