Small business fears over VAT change

Small business fears over VAT change

More than 7,000 people have signed a petition asking business secretary Vince Cable to uphold the existing VAT Exemption Threshold for businesses supplying digital products, saying the new EU law will “cripple” their businesses.

The new European-wide VAT law causing digital products - including e-books and apps - to be taxed in the European member state in which the consumer is located, as opposed to the country from which the product is sold will be introduced in January.

The change will stop multinational online corporations such as Amazon and Google from diverting their European sales through low-VAT countries, but small companies fear that the new rules will also hurt sales of their digital products.

The petition, launched on by small business owner Isabel Zinaburg, claims the new regulations will “cripple, and potentially force into closure, thousands of micro-businesses across the UK – just as this government claims to be trying to make it easier for small businesses to grow and create jobs”.

Business secretary Vince Cable should intervene and uphold the existing VAT Exemption Threshold for businesses supplying digital products, the petition states, adding: “Why should small digital businesses be treated differently to other categories of small business in the UK?”

Zinaburg said businesses will also face “a quarterly obligation to submit VAT returns, increasing the accounting burden significantly; as well as, the cost and complexity involved with meeting the letter of the law regarding the capture and retention of evidence of its customers’ location will bring”.

Previously publishers have expressed concerns that Amazon will try and pass on the extra costs incurred once the law is in place, with Andrew Johnston, m.d. of Quiller Publishing, saying that “Amazon will cushion the rise itself—though I cannot see that happening, it will put prices up—or come to publishers and ask for extra discount . . . but I haven’t heard anything on that front yet.”