VAT MOSS Chaos

As I noted the other day, Monday was VAT MOSS Day.

Unsurprisingly, such an occasion could not occur without there being a degree of chaos.

Economia reports that Enterprise Nation has noted that HMRC vastly underestimated the number of small businesses affected by new EU rules on VAT.

This has caused “chaos” and could lead to a hike in costs for digital services.

HMRC estimated that there were just 5,000 non-VAT registered firms that would be likely to be affected by the new VAT MOSS rules, which concern the trading of digital products in the EU. The new rules, require all companies, including those exempt from UK VAT, to charge VAT on all digital products such as ebooks, at the rate charged in the customer’s country.

The Department for Business, Innovation and Skills however estimated that there were 350,000 working within the affected space.

Oddly though, HMRC is standing by its initial estimate.

Emma Jones, Enterprise Nation’s founder said:

“The EU VAT regulations caused havoc in the digital small business community. If details of the new charges and reporting responsibilities had been communicated earlier, we’re sure there could not only have been more opportunity to make amendments to the bill, but that an entrepreneurial solution to the problem could have been developed. 

As it was, not even the marketplaces themselves had prepared new software or worked out the finances."

None of this should come as any surprise, I warned in December that VAT MOSS would lead to massive confusion.

Tax does have to be taxing.

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