Controversial EU rules that require VAT to be levied on digital sales will not be subject to a minimum threshold, despite calls from UK MEPs.
The EU rejected proposals for the new regime to include a threshold for sales, meaning that businesses will be required to charge VAT at the rate levied in the European country in which the sale is made, even if total sales fall below the UK VAT threshold.
The rules have been heavily criticised by microbusinesses and pressure groups, with some suggesting that they will force the smallest businesses to cease trading in Europe.
In response to the calls, European commissioner Pierre Moscovici said: “Microbusinesses can still enjoy the benefit of their VAT exemption threshold for domestic supplies and this is still the case in the UK.” The threshold for sales in the UK is currently set at £81,000.
Businesses that supply goods or services in the EU can register for HMRC’s VAT Mini One Stop Shop (VAT MOSS) scheme. Under the scheme firms are required to submit a quarterly VAT MOSS return and pay any VAT due. The Revenue will then forward the return and parts of the payment to the relevant EU member states.
Opposition to the scheme has been led by campaigning group Enterprise Nation. Responding to the proposals at the end of last year, Enterprise Nation head Emma Jones said: “Small business owners are very emotional and worried, but the only change that can be made is at an EU level. I think HMRC was shocked by the extent of the reaction to this.”