#VATMOSS #VATMESS - An Open Letter

I don't normally post about political-business-type-things here, but this is a big one, and it could potentially impact on all of you too, so I feel I need to make an exception this time.

If you follow me, or any other craft businesses, on Twitter, the chances are you have already heard about the #VATMOSS #VATMESS storm that is brewing here in the UK and beyond. In short it is a shambolic EU VAT policy change set to come into force on 1st January 2015 which will alter the face of the digital craft pattern/tutorial business (and many other digital micro-businesses) as we know it. As it stands, the time and cost involved in complying with the legislation could cripple many of the smallest sellers to the point where they need to stop selling digital products entirely. The worst part of it all is that many of us hadn't even heard about it until this past week because the powers that be didn't see fit to tell us - in fact they didn't even know we existed.

I shan't detail the policy and list all of the many, many issues with it here because there are plenty of people who have already done so, but if you want to find out more then here and here are good places to start (be warned, it will make your head hurt).

The bottom line is that any of us who sell any craft patterns/e-books/digital music/digital magazines/apps/software/etc. to any countries in the EU have some very big decisions to make in a very short space of time, and since the current advice from tax authorities is inconclusive to say the least, for many of us it is a waiting game to see whether we will be able to continue trading in our current guise at all in the New Year. So for the time being we are doing all we can to try and raise awareness about just how many of us this blanket legislation will affect.

To that end, I have written the following letter (based on this template) to my local MP and MEPs, and local newspapers. I may get no response, but at least I feel like I am doing something. It is unlikely that the decisions are going to be reversed, but at the very least we need the Government to realise the scale of this problem, and the more of us that shout about it, the more seriously they will have to take us.

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Dear Sir, 

I am writing to you regarding the EU VAT digital supply change which comes into force on 1^st January 2015.

As a sole trader who makes a meagre living by designing and selling, among other things, my original embroidery patterns in a digital format I was horrified to discover that this little publicised (at least to sole traders like me) legislation will burden my business with an unfeasible amount of extra administration and cost, so much so that I am being forced to reconsider whether I am able to continue trading in my current guise at all. After spending more than five years putting every waking hour (and many when I should have been sleeping) into building up my tiny business from scratch, this prospect is truly heart-breaking.

The legislation was designed to prevent internet giants from avoiding tax, but in fact the impending changes will have a disproportionate effect on the smallest firms trading with the EU. In my experience the majority of digital designer/maker/sellers are tiny businesses similar to myself who simply do not have the time or resources to comply with the ruling. We have been completely ignored by policy makers who, due to sorely inadequate research, seem entirely unaware that we even exist.

The rule change will force small businesses, including many wildly under the £81,000 VAT turnover threshold, to register for VAT with all the complications and cost that brings, as well as keep abreast of VAT rates in up to 28 countries in order to sell craft patterns, e-books, e-courses and digital products in the EU. Even with the VAT MOSS option and emerging advice suggesting that we may be able to split our cross-border business activities from the bulk of our trade, we are still expected to obtain and retain specific data from each and every customer, even for sales of a couple of pounds, to prove their location. Our small-scale off-the-shelf web solutions and systems are not set up for data capture and implementation of this would cost more than the extremely low-value products we are selling.

Current estimates suggest this will affect 264,000 early stage businesses in the UK. I am just one of this huge number and we are not firms with large accounts departments. We are small, fledgling businesses; sole traders just trying to scrape a living. We may not provide much in the way of high tax revenues, but if we are forced out of business because of this ruling then that is an awfully large number of unemployed people back on the streets, looking for work that is already scarce.

The Government is always talking about encouraging small businesses and new enterprise; increasing the number of start-ups and protecting everyday hard-working taxpayers. However by treating self-employed designer-makers like myself in the same way as multi-national re-sellers like Amazon and iTunes, the outcome is the very opposite of this. It is killing off and turning away an entire generation of innovative young entrepreneurs, and destroying everything we have worked so hard to create. We were not even considered by the policy makers, let alone consulted.

The world is becoming increasingly digital, and we should be encouraging the innovation and international trading opportunities that go along with this, not penalising micro-scale indie sellers who make the most of it. VAT MOSS is a disincentive to supply consumers in other EU countries and moves against the trend towards greater international trade particularly through the internet.

In much of the reading I have done, HMRC are providing conflicting information on how this policy will be implemented and interpreted in reality for the smallest businesses like mine. For example, whether or not it is acceptable to email files to a customer if the process is fully manual and the online element is essentially just a shop window (this says yes: http://www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/blog_posts/eu-vat-changes-twitter-q-a-31555, this says no: http://ysolda.com/blog/2014/11/26/they-didnt-know-the-impact-of-vatmoss-on-really-small-businesses) – the two conflicting answers both seem to come from Andrew Webb, Senior VAT Policy Manager at HMRC. If HMRC can’t even decide how it will work themselves, what hope is there for us? Clearly the matter needs far more consideration before it is enforced.

I am writing to urge HMRC and the EU to pause and review how this law to fight one problem, may well have created another – and to consider the views of the record number of small UK firms like mine.

I hope you decide to take this as seriously as it's being taken by the small businesses of Britain.

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If this affects you and you feel that there is anything you can do to help raise awareness, then please do share and shout as loudly as you can.

Delilah x

Comments

[Nicole Twena]

This is so worrying and must be a huge stress for you and your fellow designers. It doesn't affect me at the moment but will nevertheless send a letter to my MEP. Hope they see sense in time!

[Delilah]

Thanks for your support Nicole :)

[Mari]

Hello, Delilah! Do you know if there's a petition going on to put a stop to this? I would happily sign it. Change.org is usually a good website for petitions, they email people who might be interested in signing, and you get signatures in the tens of thousands within days. And it seems the press and other change agents do pay attention! xxo

[Delilah]

Thanks Mari - we did have a petition in the UK, and now there is an worldwide one here: https://www.change.org/p/pierre-moscovici-a-unilateral-suspension-of-the-introduction-of-the-new-eu-vat-laws-for-micro-businesses-and-sole-traders?just_created=true.
I am now about to write another quick post about it so stay tuned!