EU challenged on 2015 digital services VAT threshold

A UK Labour member of the European Parliament, Neena Gill, has challenged the European Commission to review the EU VAT registration threshold on B2C digital services. The call comes as thousands of e-services providers in the UK claim they cannot manage the new 2015 digital services VAT rules.

The new Value Added Tax rules were introduced on 1 January 2015 on electronic, broadcast and telecommunications cross-border services. The biggest change requires EU providers of services to charge the VAT rate of their country of their customer. Previously they charged their own VAT rate irrespective of where their customers where.  This change brings electronic services into line with all other services which went through a similar change in 2010.

An unintended consequence was dragging many micro-businesses into the UK VAT net for the first time. In order for them to charge EU VAT to consumers in other countries, they will have to UK VAT register to gain access to the 2015 VAT MOSS portal. Because the UK has a relatively high VAT registration threshold, £81,000 per annum, they had not been VAT registered in the past. The UK's HMRC had conceded that micro-businesses won't have to charge UK VAT to their UK customers because of the EU VAT changes.

Ms Gill has now asked the European Commission, via the Parliament, on 7 January 2015 in a written question if it had considered the impact of the above changes on small companies. She enquired if an EU VAT registration threshold as on e-commerce could be introduced.  Raymond Finch, UKIP MEP, had asked a similar question on 14 January 2015.