Today, the Economic and Financial Affairs Council (ECOFIN) signed off on the reforms. Here’s the official press release.
There are a couple of things in the small print that we’re double checking. Meantime, the tl:dr version is – we won! Below cross-border digital sales of €10,000, national VAT rules will apply, which in the UK means small businesses are free of that particular burden. And if you are doing that amount of digital business, there are now payment/transaction systems that are a viable overhead at that level. Up to €100,000 the rules are also simplified, again reducing costs and admin.
This doesn’t come into force until 1st January 2019, alas. But bear in mind on 4th December 2014, I was sitting in a meeting with the relevant department heads from HM Treasury, HMRC and a government minister, telling me and everyone else that there was nothing to be done, it would all be fine, and we should just go away and not worry our pretty little heads about it (I am paraphrasing slightly…)
Half a dozen of us self-employed women weren’t about to accept that, so we went off to find somewhere for lunch and the EU VAT Action Campaign was the result.
What does this mean in practical terms? If you’re new to the VATMOSS fiasco, here are a few reasons why the 2015 regulations, devised with minimal understanding of the current state of digital commerce, were so disastrous.
What does this mean for me personally? I am hugely thankful for my colleagues in the EU VAT Action Campaign, most notably Clare Josa who put in so many dedicated hours, and such effective, charming intransigence when faced with officialdom repeatedly trying to brush us off.
We owe an incalculable debt to Nicholas Whyte known throughout SFF circles, as a Doctor Who fan, an able Hugo Awards administrator, and indefatigable reader of a prodigous quantity of books. In his day job, as senior director, global solutions in APCO’s Brussels office, has more than two decades of experience in international affairs, advocacy and research. He counsels APCO’s clients on ally development and coalition building, advocacy, public affairs and strategic communication. He got in touch after my first blogpost about this, to convince me that yes, the EU Commission could be convinced this was a mistake, and here’s how to start going about it…
We can be very precise about the contribution made by Jason Kingsley of Rebellion . It was absolutely vital that we sent Clare Josa to the Fiscalis Summit in Dublin, in September 2015, to convey the full extent of the damage being done to the Finance ministers and chancellors of the European states. Jason stepped in to make sure we reached our fundraising target to cover the costs of sending her. As co-founder and CEO of one of the UK’s largest computer games companies, and of Rebellion Publishing, he really understands the digital economy. Outside the office, he’s also, quite literally, a knight in shining armour on a white horse. Seriously, click that link.
Given SF&F publishing took to the digital realm early and enthusiastically, this was set to hit our genre hard. The flipside of that was the widespread and ongoing support our campaign got from small presses, independent authors and fandom, in spreading the word, boosting the signal, writing letters and helping raise funds. Once again, I am very grateful to all.
Lastly, I was given the BFS Karl Wagner Award in 2015 for my work on behalf of authors and independent presses on this issue, alongside my writing. Today’s result puts the final polish on that. Okay, I didn’t imagine they’d ask for it back, if for some reason we couldn’t see this through but still…
Not a bit of it. Throughout 2016, whenever we’ve been told ‘there should be some news by such-and-such-a-month’ we’ve noted that in our diaries, and followed up accordingly. No one has been left in any doubt that we’re not going to let this drop, in the nicest possible way.
We’ve stayed in touch with our contacts in Whitehall and Brussels, and with the MEPs and their teams who’ve been working with us – most notably Catherine Bearder (Lib Dem), Anneliese Dodds (Lab) and Vicky Ford (Con). This has continued to be a cross-party/non-partisan effort, and we are tremendously grateful to them all.
Now we have real and definite progress to report! The proposed threshold & simplifications for EU VAT have been announced. This is a solid proposal backed by the key decision makers in the EU.
In summary – businesses exporting below €10k of digital sales into the EU (excluding their home country sales) will apply their home country VAT rules, not digital VAT. Those above that but with sales below €100k will be eligible for a ‘soft landing’ of just one piece of data, to prove the customer’s location.
This will help many thousands of micro businesses to continue – or resume – trading, without having to move to 3rd party platforms (costing them 30% or more in commission) or hampering their prospects with geo-blocking.
So are we done? No, not quite yet. This is a proposal and now needs to become law. There are also some issues in the fine detail that need addressing, as well as questions about what happens in the interim. You may rest assured that we’re tackling those.
For now? We celebrate! Bear in mind that two years ago, those self-employed women and solo entrepreneurs who were worst affected by this, who’d never even been consulted, were told categorically by a government minister and senior officials from HMRC, HM Treasury, and the European Commission, that the VATMOSS rules were now set in stone and there was no possibility of changing them because they had been agreed across the EU, as implemented on 1st January 2015. Business organisations and pundits told us the same.
We refused to accept this. We got busy. You all got busy. Every single person who wrote a letter to their MP, their MEPs, their Treasury or Finance Ministry, who signed online petitions, wrote blogposts and joined in the Twitter-storms contributed to this success. Everyone who contributed to the crowdfunding which enabled us to send representatives to Brussels, to Dublin and to lobby key officials. All those with expert knowledge of tax, finance and political campaigning who shared their advice and insights with us. We couldn’t have done this without you.
So keep your eyes open for opportunities to help us next year, so we can get this done and dusted once and for all, as swiftly as possible!
If you’ve been wondering why I haven’t blogged in over a week, just look at the UK newspapers…
Given I’ve committed hundreds of hours, thousands of words and an incalculable amount of energy and concentration as part of the EU VAT Action team trying to secure meaningful reform of the 2015 EU digital VAT rules, you won’t be surprised to learn that was uppermost in my mind. Had this collectively disastrous referendum decision thrown all that hard work in the bin?
The short answer is no, for which I am profoundly thankful. Clare Josa and I went into London yesterday for a meeting with our Whitehall contacts to discuss the Brexit vote implications. We shot a quick update video in Green Park immediately afterwards, which you can find here. To summarise the key points arising, I’ll quote from the EU VAT Action site, which is where you should link to spread the word to other interested parties.
The UK is still in the EU and has the same rights and obligations as before, so EU Digital VAT continues to apply, worldwide, as before.
The EU Commission still intends to propose the promised legislation for a threshold and a simplified ‘soft landing’ area above that threshold, by the end of this year. This is a huge achievement, since a year ago they did not believe there was a need for either of these.
Another major achievement is confirmation that the Commissioner proposing the Digital Single Market legislation WILL include a provision to permit geoblocking for the purposes of reducing legitimate administrative burden, such as EU Digital VAT
The UK will continue to have a voice in the EU Digital VAT negotiations, whilst the UK is in the EU. However, once Article 50 is invoked and the formal leaving process has started, other Member States may choose to give less weight to our opinion
This is an issue because the UK has been the most vocal country over the new EU Digital VAT rules. So it is more important than ever for micro businesses outside of the UK to make sure their Finance Ministers, Members of Parliament and Members of the European Parliament are fully aware of the challenges you face with these rules. We are happy to help you get creative in making your voice heard, if traditional routes aren’t yet working for you. (See Action Challenge, below)
Whatever the outcome of the UK’s EU negotiations, the OECD (Organisation for Economic Cooperation and Development) trend is for more countries to implement similar place of supply rules to those from January 1st 2015 in the EU. This means that you need to keep taking actions to upgrade your business systems, so that you can prove where your customers are located.
Whilst the OECD recognises the need for thresholds and simplifications for the smallest businesses, it is imperative that we keep up the pressure on our shopping cart providers and payment processors, to supply us with the data that we need, to be able to comply.
The VATMOSS system in the UK will remain in operation for the duration of our negotiations. What will happen to it after that, no one knows. But please don’t make major business decisions based on guesswork, at this stage.
Next steps: we will continue to give you a voice within the UK government and the wider EU. The campaign has already achieved recognition in Whitehall, Brussels and at the OECD. Together, we have achieved the breakthrough that these decision-makers now understand that micro businesses – especially the smallest that are running on a laptop from a kitchen table – must be considered when changing legislation.
None of this could have been done without your support and the actions of the thousands who have supported the campaign. Thank you.
And here is the action we need you to take, please: And we need your support now, more than ever. We have been asked to put together a technical paper for the OECD Working Party on VAT, summarising the specific technical challenges that micro businesses have faced with complying with this legislation, over the past 18 months. So:
Please write to your Finance Minister, MEPs, Member of Parliament and copy to us (euvat @ clarejosa . com) to tell them:
Specifically why you cannot comply with the EU Digital VAT rules – or why it is difficult for you.
This will help to keep your problems top-of-mind, despite the background noise, and it will encourage Finance Ministers to vote to support the threshold and ‘soft landing’ legislation, when it is proposed.
So that’s the situation there. Phew.
As for the rest of it…
I didn’t think I could be more disgusted by Nigel Farage by now – but he managed it with his antics in the European Parliament. I’m thinking back to our VAT campaign visits to Brussels where I was able to see at first hand just how hard our MEPs and their teams of all parties – except UKIP who were an idle, know-nothing embarrassment to the entire UK delegation – have spent years working on so many vital issues in the interests of us all.
The Leave vote has thrown all that time, effort, passion and commitment from so many people into the bin for what’s already turned out to be a pack of lies.
Because Tory posh boys were more concerned with playing their power games than really thinking hard about the possible outcomes and the reality for the rest of us.
And now they are in absolute denial – or are totally oblivious – to the very real commercial damage this is doing from biggest to smallest businesses while the UK’s standing in Europe has already suffered more damage than we can hope to make up in a decade.
Meantime, the Parliamentary Labour Party has decided now’s the ideal time for a game of King of the Castle. When someone, anyone should be demanding answers from any and every Tory leadership candidate every hour on the hour to expose them for the charlatans they are. Yes, okay, I know it’s a lot more complicated than that – but honestly, the timing?!
Are there *any* politicians in England at the moment looking out for the national interest in the current crisis rather than serving their own narrow interests and ambitions?
I say England because Nicola Sturgeon and Scots MEP Alyn Smith have been showing how these things should be done!
What of the Greens? Plaid Cymru? LibDems? There’s talk of a progressive coalition. I would dearly love to see that gain some traction. And yes, I am in favour of proportional representation, even at the price of UKIP MPs. Having them in parliament would very rapidly expose the inadequacy of their position and skills for one thing.
Where do we go from here? As far as the big picture’s concerned, I honestly have no idea.
At the personal level, I’m going on holiday for a week with my husband, to the Lake District. We’ve been trying to arrange a break since March but what with one thing and another…
Anyway, I intend to have as much downtime as possible, especially from social media, and that’s why I’m disabling comments on this particular post.
When we get home I intend to get back to writing, and blogging about books, writing and the more usual aspects of my life!
I don’t imagine you’ll be surprised to learn that we have cancelled all plans to visit Brussels between now and the end of the year. Not without giving this decision serious thought, since we are very well aware of digital businesses’ need for interim relief while a threshold and other details for revising this legislation are negotiated. However, after the Paris attacks, it was self-evident that we simply wouldn’t get access to the high-level decision makers who could enact this while so many, far more urgent concerns are taking up their time and focus.
The security situation was a further consideration, though this time last week we were thinking more in terms of getting caught up in evacuations and/or delays prompted by alerts after someone’s shopping got forgotten on a train or some joker phoned in a bomb threat. Well, the Brussels lockdown over the past few days serves to confirm this was the right decision.
What we will be doing is writing a report on the current situation, a year on from the start of concern and campaigning over this new system. The EU Commission has specifically asked the EU VAT Action Campaign to do this, to contribute to their ongoing impact assessment. We will also be sharing it far and wide with everyone who could help secure interim easements.
Watch this space for further details on how you can help us supply key data to the decision makers.
Here’s an important new route to making your voice heard on the VATMOSS system and related problems stemming from the new regulations.
Most crucially if you are a non-UK business, your answers will help prove that this isn’t just a UK issue. Which it really isn’t. There’s no wonderful solution available to Hungarian or Danish businesses, after all – or anyone anywhere else. We’re all facing the same difficulties.
Please find 15 minutes for this – and please spread the word through your personal and professional networks. The more responses they get, the more likely we are to see meaningful change on a worthwhile timescale.
“As part of the study on e-Commerce in Europe, Deloitte was invited by the European Commission to assess the effectiveness and impact of the 2015 place of supply changes and the MOSS system. The survey forms a part of this evaluation exercise and focuses on microbusinesses and on the impact of the implementation and application of the 2015 place of supply rules and MOSS system.
The information on administrative burden impact on microbusinesses provides a valuable angle to our overall analysis. Therefore we would appreciate your responses to the questions below. The results of the survey will be included in our overall analysis and presented in the report, which will be published early next year.
Participation in the survey should not take more than 15 minutes. Please provide us with your feedback by Monday 26 October.”
The Telegraph (and other papers) have been triumphantly proclaiming victory in the VATMOSS fight. The EU has conceded that the legislation needs revising to include a threshold. Hurrah!
Well, as the saying goes, up to a point…
Securing this sort of solid, on-the-record commitment by both the European Commission and the UK Government to researching and enacting such revision as soon as possible is undoubtedly a major win for the EU VAT Action campaign. A year ago they were all saying there was no need for any such thing, everything would be fine and anyway, nothing can be done if it wasn’t.
But we still won’t see any long-term relief for the thousands upon thousands of businesses hit by this for another two years – maybe eighteen months at very, very best. Which means we still need vital interim suspension or some other easement to stop the ongoing damage being done to the grassroots digital economy.
Not least because the deficiencies in the consultation process (laid bare here) before all this was brought in are so appalling that could be the basis of a legal challenge – if any of us had the money to instruct the appropriate lawyers…
So please feel free to write more letters to your MPs and MEPs stressing just how and why we need to see action now.
Interim relief could come from Brussels, especially if as many people as possible reply to the current consultation on modernising VAT for cross-border ecommerce. If this affects you at all, please do so – no questions are compulsory and there are plenty of boxes for you to go into detail about your problems, and most likely, why a lot of the questions being asked are in themselves inappropriate, revealing dangerous flaws in the understanding of the new problems.
Please complete the survey if you’re not yet a digital seller but only deal in physical products. Although ‘plans to roll this out to physical sales in 2016’ have been revised to ‘plans to discuss plans to roll this out in 2016’, it’s still vital that the law makers understand the needs and concerns of those posting actual parcels who will be affected by any extension of what’s currently still such a mess.
As part of this consultation process, EU VAT Action Team members (specifically me and Clare Josa) are off to Brussels again next week. Then we’ll have another trip in November, focused on meetings with cross-border, cross-party groups of MEPs, looking to nail the misapprehension that this is only a UK problem.
As before we’re having to fund all this ourselves, at time of writing. The previous Just Giving appeal was focused on getting Clare Josa to the Fiscalis Summit in Dublin and hoping to fund one further trip to Brussels. Now that we’re looking at two Brussels trips plus more meetings in London to make our case up to ministerial level, any and all donations to the campaign fund via PayPal will be most gratefully received, however small those might be.
(If anyone wants to discuss other methods of making a contribution, email me as per the information on my Contact page. And yes, I am very well aware how generous the SFF community has already been – we are extremely, profoundly grateful.)
For those of you playing the VATMOSS game, who haven’t already picked up on this elsewhere, the EU VAT Action Campaign’s latest blog post – as written by me.
For those of you now getting replies from MEPs and other indicating general support for the notion of a threshold, please go back and press them hard on the timing issue. EU and other countries’ agreement in principle is all very well but the current timetable won’t see anything agreed before 2018 and could take as long as 2020. By which time the grassroots digital economy will be wrecked.
A quick VATMOSS related update and question for those using this crowdfunding platform, whether as creators or supporters.
Patreon are now clearly adding the VAT due at the ‘customer’s’ location to the pledges people are making. So someone in the UK looking to support a US creator at $5 a month now sees they’ll actually pay $6 – of which $1 goes in tax.
This certainly relieves creators of the headache of registering for VATMOSS and processing individual returns.
But is it going to have an impact on patrons’ willingness to support them?
And I very much want to see if the VAT is ONLY being added where the creator is supplying the patron with something via digital means; an ebook, an art file, a music file or similar.
Or is everyone being charged VAT, even when the buyer and seller are in the same country, on the basis that Patreon’s supplying the digital service of managing the crowdfunding and that’s what’s now subject to VAT? In which case, should the patron be bearing all that cost when the creator is the one offering their wares or services via this platform?
Please could those of you who use Patreon let me know how you’re seeing this work in practise, and particularly about any negative feedback or drop-off in support, either in comments to this post via email if you prefer (see contact info here)
Or get in touch via Twitter or Facebook – whatever suits you best. And spread the word.
As the dust from the Irish Revenue Fiasco settles, we can now see what Europe’s smallest businesses think of their chances of selling digital products online, six months after the new EU regulations were introduced. Alongside the opinions of the up-and-coming digital entrepreneurs and other companies keen to expand into international online trade, to drive the knowledge economy and generate employment and growth.
From 7th-9th September, the Fiscalis Summit in Dublin will see representatives of every EU Finance Ministry discussing how well or badly implementing these new rules has gone.
So we have until that conference to convince the Finance Ministries that this current system is damaging for all businesses and unworkable for those who simply cannot meet the administrative burdens and costs of compliance necessary to sign up for VATMOSS.
Otherwise there is no realistic prospect of seeing meaningful changes to this destructive legislation before 2017/2018.
We need everyone to act, most particularly those outside the UK, to prove this isn’t just a UK concern, which is something far too many other European finance ministries still believe. They’re still only talking to business organisations and the largest companies who can handle all this far more easily than the rest of us.
They need to hear the specific details of the ways this legislation has hurt your business and the changes you’ve had to make in order to just keep trading. However well the VATMOSS payment processing system itself might work is irrelevant if the administrative burdens and costs of compliance are so damaging.
European finance ministries and the tax officials handling all this need to hear from the sole traders, the one-person companies, the part-time start-ups and side-businesses who have been hardest hit by all this, precisely because the Internet now offers so many opportunities for small-scale, direct e-commerce.
Some of those start-ups could have become the next Apple, Amazon or Google. But as long as these new regulations raise such an off-putting barrier to entry into the digital single market, those giants will continue to dominate.
Last but by no means least, we’ve also navigated PayPal’s rules and regulations to set up a Donate button, for those of you who’d prefer that route for making a contribution to the campaign. All money received will only go on direct expenses. We all continue to donate our time for free – yes, even after ten months of this…
When dealing with the VATMOSS fiasco, laughs are few and far between, so I did enjoy this contribution to the weekend’s online debate over whether or not letters from Dublin demanding insane amounts of money were a scam or some Irish Revenue office cock-up.
Meantime, it’s now been established that the letters did indeed come from the Irish Revenue but no, they’re not actually demanding that money. They were apparently generated by a system error and an investigation is underway. Apologies will be forthcoming. So that’s that, okay?
Actually no, it’s very far from okay, and let’s not just draw a line under it and move on.
Not when members of the EU VAT Action Team and of the HMRC Digital VAT Working Group had their weekends so thoroughly disrupted by all this – along with the HMRC officials trying to get answers for us.
Not when these letters have generated so much concern and annoyance. Some recipients getting demands that weren’t for tens of thousands of Euro genuinely thought they were in danger of being aggressively pursued for a mistaken debt, while those convinced this was all a scam were very worried indeed about the data breach presumably indicated by the amount of genuine and supposedly confidential information in these letters about them and their businesses.
And if I was an Irish tax payer, I’d very much want to know how much money has just been wasted on printing and posting hard copy letters internationally to potentially ten thousand or so companies.
This is the second time a ‘computer glitch’ has generated a batch of bogus letters. After the first quarter’s VAT returns, the German tax system sent notifications to companies in the UK and the Netherlands with details of the tax office in Kleve they’d be required to deal with, complete with reference and registration numbers for all future correspondence. Once again, opinion was split between scam or screw-up – along with those genuinely worried that they were now required to deal with a tax office in a different country and language.
Because we cannot safely dismiss any such letters as a scam. The assurances we were given back in January that any queries from foreign tax authorities would be directed through HMRC have proved worthless. Small businesses in the UK have been contacted direct by tax offices from Sweden, Germany, Denmark and Luxembourg so far, over discrepancies in their VATMOSS returns for as little as five pence sterling. Yes, really.
Though doubtless some people who aren’t following all this debate online still believe that assurance from HMRC. What’s going to happen when one of them bins what turns out to be a genuine letter sent direct to them? How much trouble will they find themselves in, for wilfully failing to respond, as punitive interest is added to what they might owe?
On the other hand, what’s going to happen when some sophisticated scammer sends out a few hundred thousand emails using publicly available data gathered from Companies House, because some of those will be registered for VATMOSS, right? And some of those will be persuaded that they are somehow required to pay a non-ridiculous but non-trivial sum of money. Especially those operating at the small-scale, direct e-commerce end of the businesses all caught up in this. People without accountants and without much experience of either governmental cock-ups or the increasingly common online scams.
And what does this say about the VATMOSS systems we’re supposed to rely on, as we invest hundreds of pounds and hundreds of hours of lost working time attempting to comply with this legislation? It’s already apparent these rules were devised by people with a wholly inadequate understanding of the Internet and direct e-commerce. Now it looks like the computer systems handling all this have been put together and run with a similar lack of skills.
Let’s not even get started on the problems people across Europe have trying to get answers out of their tax authorities when something like this happens. Callers to the HMRC fraud line this weekend found themselves talking to staff who had no clear idea what VATMOSS might be, still less how scammers might be misusing it.
This entire scheme is not fit for purpose. The EU Commission has already acknowledged the regulations need reviewing and a turnover threshold applied. That process could take up to two years.
So far, so good, but meantime, it is wholly unacceptable to insist that businesses continue to try to comply, using these VATMOSS systems which are now inspiring zero confidence.
These regulations need suspending with immediate effect until a system that’s proven to be fit for purpose can be agreed.
The EU VAT Action Team will continue to represent the interests of all those online businesses and traders who were never consulted, still less considered, when this legislation was devised.