Thousands of SMEs unprepared for new EU VAT rules

19 September 2014

Thousands of SMEs unprepared for new EU VAT rulesMajor EU VAT rule changes that will affect thousands of UK ecommerce firms come into force in January 2015, yet many businesses are completely unprepared.

The new EU VAT rules require merchants to identify where their end customer is located by collecting two pieces of non-conflicting evidence and then applying the correct VAT rate. These changes will take effect from 1 January 2015.

There are also additional compliance obligations around reporting VAT receipts, storing information on VAT transactions for ten years and ensuring compliance with the various VAT regimes across the EU. Online merchants that do not comply with the new rules will face penalties in the jurisdiction of the member state in which they have infringed on VAT laws.

No minimum threshold is being applied to the new rules. Given that the existing VAT registration threshold in the UK is £81,000, thousands of small businesses will now be brought into the VAT net.

HMRC has estimated that some 42,000 UK-based online merchants will be affected by the new rules. Many of these will be small businesses that don’t currently have to register to pay VAT in the UK.

Financial software provider Taxamo is warning that many SMEs are ill-equipped to deal with the 2015 rules changes.

John McCarthy, CEO of Taxamo, said: “Every day we are taking calls and answering enquires from merchants who are confused by the new rule changes and don’t understand what they need to do to comply. The sad part here is that even if a merchant is unaware of the changes, through no fault of their own, it will be them that will suffer.”

Taxamo is hosting an interactive event giving merchants practical information and guidance on 23 September. The event will be streamed live from Barclays Accelerator in London, allowing online merchants to consult the panel of experts.

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