What is it?

Since January 2015, there has been a new VAT regime for UK microbusinesses selling digital services directly to customers in the EU. Under this regime, VAT liability has moved from where the digital service is sold to where the customer is based.

This has created major administrative problems for the UK’s smallest businesses – hampering their ability to grow, and even making it difficult for some to keep going.

IPSE is calling for EU-wide VAT thresholds to tackle this burden on our smallest businesses. 

What are the issues?

1. Admin burden:

Under VAT Moss regulations, companies have to keep their records for 10 years, which places a significant and unnecessary burden on the smallest businesses.

This is exacerbated by the need for businesses to verify their customers’ locations by collecting two pieces of information from them – for example, their billing address, the location of their bank or their IP address. 

2. Unintentional consequences:

These regulations were intended to stop large multinational firms avoiding tax by working through subsidiaries, but in practice one of its biggest effects is to make things difficult for the smallest businesses.  

What we're calling for

1.VAT thresholds

We’re arguing that the EU-wide VAT threshold should be kept at the UK level of €114,000. We know this will be difficult to be implement because of the number of member states without any VAT threshold, but we believe the EU should be taking steps towards this.

2.Get rid of the admin burden

Because we understand it may take some time to implement VAT thresholds across the EU, we support interim ‘easements’ in the meantime. These ‘easements’ would exempt microbusinesses from some of the most onerous requirements of the current VAT regime – for example, 10-year record-keeping.