EU VAT Changes Force Small Businesses to Close Down

EU

VAT changes in the EU are forcing many small businesses to close down. Most do not want to risk being on the wrong side of the law come tomorrow. January 1 is the date set for changes to become official.

Small businesses selling online products to customers will need to start charging VAT at the rates set in the 28 different nations of the EU. This is only for customers who buy the products from the individual locations, but is raising a number of concerns. Another concern is that it has not been widely publicized, meaning that many online businesses could be operating illegally for a short period of time.

Before now, the seller would charge VAT at the rate it was in his own country. It would not matter where the buyer was from. However, now, it depends on the location of the buyer, meaning that sellers will need to know the rates for all 28 countries. Just selling an item for $1 will lead to businesses having to save receipts for VAT records and register for the tax. Until now, sellers in Britain were exempt from VAT if they had a turnover under £80,000 per year. That threshold is being removed completely from tomorrow.

Tax officials in the UK have confirmed that they will enforce these new changes. It has led to a number of small businesses closing down because they are forced to follow the EU VAT changes. Trying to track the sales based on location can be difficult, and keeping track of VAT rates in 28 different countries is even harder.

All digital products will be affecting, including computer games, MP3s, eBooks and knitting patterns. Individuals will need to find out the length of time they need to keep their records based on the individual countries, too, which could mean keeping records for more than a decade.

Accountants are suggesting that micro businesses close down. Those that make no more than £500 per year will find it is not worth trying to comply with the new law. Those looking to start up a new business will need to consider the changes to the EU law from January 1.

It is not completely too late to do anything about this. Even now, people are using social media to show how devastating this is going to be to businesses around the EU, especially in the UK. Those in Britain are encouraged to use the hashtag VATMESS when posting on social media to get it trending. They are also encouraged to aim their posts at David Gauke, the treasury minister.

There is one reason for the new EU laws to be introduced. It was an attempt to prevent Amazon and other large firms from avoiding tax payments. Many firms base themselves in Luxembourg where the VAT is much lower.

The whole of the online industry will be threatened with this move. Not only does it mean businesses are closing, but there will be less choice for customers. It could lead to the prices increasing for products as only the larger businesses see any point in operating on a daily basis. By January 2016 this law may cover all types of products, forcing other small businesses to close down as they fail to meet the changes to the EU VAT laws.

Opinion by Alexandria Ingham

Source:

The Telegraph

Photo by Chris Isherwood

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