New VAT MOSS exemption plan ‘will benefit microbusinesses’

Self-employed people and microbusiness owners are to benefit from planned changes to the controversial European VAT Mini One Stop Shop (VAT MOSS) regulations.

The European Commission has confirmed that it will be proposing an exemption to the rule for small companies and sole traders selling across EU borders, following a considerable backlash among smaller firms to the introduction of the laws in January 1st 2015.

Intended to prevent large companies from reducing their VAT bills by registering digital sales in other countries such as Luxembourg, the regulations have nevertheless been criticised for creating substantial amounts of red tape for small firms, leading many to halt digital sales of their products and services overseas in order to avoid falling foul of the laws.

Currently, UK enterprises do not have to register for VAT until they have £82,000 in revenues, whereas many EU countries have a lower figure or no threshold at all. The aim of the laws was to prevent big companies from using this discrepancy to minimise the amount they pay in tax, but the scope of VAT MOSS has been condemned as being too broad.

Responding to the announcement, the Association of Independent Professionals and the Self Employed (IPSE) has expressed satisfaction at the decision to introduce an exemption for smaller businesses with a modest turnover, many of which are sole traders.

The organisation has been calling for such a move for some time, saying the current regulations have been “making life far more difficult for our smallest businesses”, while discouraging many growing companies from selling their services online.

However, it was also noted that the threshold exemption could take years to come into effect, due to the need to ratify the changes with all EU member states.

IPSE’s chief executive Chris Bryce said: “Sadly, it could be a long time before improvements to VATMOSS pass through the European Parliament. The Commission should now consider what interim measures can be taken to reduce the burden on businesses that in all likelihood will be exempted in future.”