A Lynn designer has joined the growing number of concerned voices raised by small businesses who fear that new legislation on EU VAT payment due to come into effect on January 1 will prove to be a “nightmare”.
Sophie Simpson, of Goodwins Road, is a sole trader who makes her living through her design business, What Delilah Did, creating and selling embroidery patterns in a digital format. She specialises in cross stitch, making up patterns and then providing people with PDFs, which she then sells on.
It was only very recently, that she and many others who run micro-businesses, realised the implications of new VAT laws, which could force them to reconsider trading in Europe.
From January 1, if a UK business makes a sale in another EU member state, they will have to pay VAT in that country. The legislation applies to digital products only, such as e-books, online courses or downloads.
The only way to comply is to register for VAT with that country or register for HMRC’s Mini One Stop Shop scheme (VAT MOSS).
This scheme requires a business to submit a single calendar quarterly return and VAT payment to HMRC, which then sends the appropriate information and payment to each relevant member state’s tax authority.
All sales of digital services to EU customers outside the UK will be subject to local VAT regardless of the value of the sales, as there will be no minimum threshold.
Sophie said: “It would be an admin nightmare, If something costs as little as £2 or £3 then it’s not worth the time and the energy.
“My time has a value and for the time it would take to process transactions in order to trade with Europe, it would just not be worthwhile.
“This hasn’t been thought out for small businesses like mine where people are self-employed, and which have just one self-employed person operating them.
“There are many implications involved, such as the cost of software needed to identify where customers are and data control.
“Even if you use VAT MOSS, you are still responsible for working out the VAT rates in different countries. I was shocked and horrified when I heard about it and it came as a complete surprise. Now we will have to wait and see whether anything will be done.
“After spending more than five years putting every waking hour into building up my tiny business from scratch, the prospect of whether I can continue trading is truly heartbreaking.
“The legislation was designed to prevent internet giants from avoiding tax, but in fact the impending changes will have a disproportionate effect on the smallest firms trading with the EU.
“In my experience the majority of digital designer/maker/sellers are tiny businesses similar to myself who simply do not have the time or resources to comply with the ruling.
“We have been completely ignored by policy makers who, due to sorely inadequate research, seem entirely unaware that we even exist.
“The world is becoming increasingly digital and we should be encouraging the innovation and international trading opportunities that go with this, not penalising micro-scale indie sellers who make the most of it.”
A campaign has been launched on Twitter asking people for their comments and to sign an online petition to register their protests.
Most of Sophie’s market is split equally between sales in America and the UK, but she also has several loyal customers in countries throughout Europe.