UK PM to raise fears over EU tax rules

Friday 20 March 2015

David Cameron is to take up the cause of hundreds of online "micro-businesses" threatened by changes in EU tax rules.

The Prime Minister is planning to raise new VAT regulations for automated digital services at the EU summit beginning today in Brussels amid fears some small traders could be forced out of business altogether.

British officials said that small businesses selling e-books, producing apps, hosting websites and running online courses were among those which had been hit by changes which have left them struggling to comply.

Under the new rules which came in at the start of the year, VAT is now charged at the rate of the buyer's country of residence, rather than the seller's.

While the move has largely worked to the advantage of the UK, removing the competitive advantage for firms based in countries with lower rates of VAT, it means British firms now have to register for VAT in EU countries to which they sell.

Whereas firms must have an annual turnover of £81,000 before they need to register for VAT in the UK, under the new EU rules there is no threshold which means that even the smallest traders are caught.

Clara Josa, of the EU VAT Action group, said many small operators simply could not cope with the new demands being placed upon them and that urgent action was needed to prevent them being forced out of business.

"The new EU VAT legislation brings corporate levels of regulation and administration not just to the boardrooms, but also to the kitchen tables of sole traders," she said.

"Thousands of the smallest EU businesses cannot physically comply with the data requirements and the costs of compliance are hugely damaging."