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EU VAT 2015: Grace Period for Small Sellers in UK


 Certain small sellers of digital goods and services have 6 month grace period to adapt to EU 2015 VAT changes.

It’s a new year, and sellers of digital goods in the European Union must adapt to new VAT rules. Recognizing the magnitude of the change, HM Revenue and Customs (HMRC) is allowing a grace period for small businesses.

HMRC has announced that:

  • “Businesses whose turnover is currently below the VAT registration threshold (£81,000 per year) will need only to register for VAT on their sales to private consumers in other EU member states. They will not need to charge VAT on any sales to UK customers until 30 June 2015.”
  • “Micro-businesses that are below the current UK VAT registration threshold, and which register for the VAT MOSS online service, may base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider. They do not need further information to be directly by the customer.”

According to Sally Beggs, Deputy Director Indirect Tax, “The UK has successfully pressed for a number of simplifications, which should help make operating under the new rules easier, and the UK continues to argue the case for some form of cross-border threshold.”

That is surely welcome news to sellers of digital goods and services, many of whom are worried the new rules could “force them to close.” UK businesses operating below the threshold can still trade VAT free to customers in the UK (The Guardian).

Yet even with the transitional period, some small sellers are worried that the changes will create an “obstacle course that will stop many [businesses from] even opening up” and will silently suffocate existing small businesses. That’s the worry of writer Megan Kerr. Concerns could be compounded by a sense of surprise. Neil O’Brien of the Institute of Chartered Accountants notes that “the majority of micro business owners only learnt about these changes via social media very late in 2014…. Naturally for these business owners the news came as a shock and did not allow them much time to implement the rules, not least because HMRC themselves did not foresee the implications for micro businesses.”

Additional information about VAT EU 2015 changes is available on the European Commission’s Taxation and Customs Union web page and on VAT Live.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.