Saturday 27 February 2016

VATMOSS - What a Mess

This is absolutely evil.

Last year, a new EU tax law came into place which is completely destructive to small online businesses.

I only learned about this last week through an authors' forum, where a small press was explaining why they couldn't use online ebook sales to generate income unless they sold the books through a third party, like Amazon. As though Amazon don't already rule the world.

The reason they couldn't sell the books themselves, and keep the profit without a middle company, is because of  #VATMOSS, or, as it's become better known on Twitter: #VATMESS.

As I understand it, having had this explained to me by said peeved publisher, it means that any company in the EU must pay VAT on one-time digital products. 

Yes, that needs some explaining.

A one-time digital product is something you create once (an e-book, album, website template) and sell multiple times to more than one person or company. 

If it's a bespoke product like a website, or a jingle, or a YouTube documentary that you have designed specifically for one person or company, that - as far as I understand it - doesn't count.

VATMOSS stands for VAT Mini One Stop Shop (presumably there's a superstore down the road?).

You'd do well to be confused about this. Usually you're not liable to pay VAT as a UK company until you break the £82,000 threshold. How many self-publishing authors or small press can claim that achievement?

But, even though you're earning £40 a quarter from selling your book online via your website, you've still got to sign up for VAT, charge it on your product, and file your quarterly returns with HMRC. The only way out of it is to use third party companies like Amazon, who automatically deal with the tax for you.

Which is ironic, as it's Amazon and Co. who are cited for this law being introduced - forcing them to pay VAT on digital items in the country of sale, rather than the corporation's country of operation.

That's not a bad idea, but the problem is that VATMOSS is being applied indiscriminately - to all sellers, whether multi-billion pound online giants, or your Aunty Ruth who's always enjoyed publishing her stories online and wanted to make a couple of extra quid for cat food.

It is so atrociously thought through that even HMRC seems to admit it's causing a headache:

HMRC has started to de-register 3,000 small businesses from the VAT MOSS system, treating them as ‘hobbyists’ rather than businesses in line with recent guidance.

It's already led to one high-profile walkout: Digital platform Ghost leaves the EU thanks to #VATMOSS

For anyone not familiar with the implications: we had to rewrite our entire billing system twice, charge many of our customers more money, and submit to woefully complex and inadequate new accounting requirements. All of which had been put in place to stop multibillion-dollar corporations like Apple and Google from tax-avoidance in Europe. All of this was a constant, constant source of pain…

In a bid to prevent online tax-dodging monopolies, this move rather seems to support them, as it means no one without sufficient funds to afford a tax-whizz is going to be able to trade for themselves. We'll all have to go through the big companies who understand the tax system, and no doubt have already found a way around it.

VATMESS just seems to be a massive headache for everyone.

Well done whoever thought that one up.

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