Cameron backed in push for EU VAT exemption

The burdensome parts of the EU’s new VAT rules for contractors and other micro-businesses supplying e-services to consumers will be pared back if David Cameron gets his way.

In fact, the prime minister is understood to have used a visit to the European Council summit to bring up the disproportionate effect that the rules have had on Britain’s one-man bands.

One newspaper, the FT, claimed that Mr Cameron will try to get an exemption in time for the summer from the onerous data requirement that buyers’ details must be kept for 10 years.

And contractor body IPSE cited Downing Street officials as saying the PM is going to put “proposals” to reduce the burden of the rules directly to Commission President Jean-Claude Juncker.

“Action from the prime minister is very welcome. While it’s no guarantee this problem will be speedily resolved, it shows that government has listened to the concerns”,  IPSE said.

“These EU changes to VAT policy were well-intentioned but have gone desperately wrong in their implementation. They were intended to tackle…web giants… but micro-businesses have become caught in this net.”

According to IPSE’s Jordan Marshall, one-person businesses are “simply not able” to comply with the rules’ 10-year requirement on data retention, which are “nonsensical.”

He added: “In order to move forward, we need cross-border EU VAT thresholds as well as action to exempt our smallest businesses from the crippling compliance cost.”

On January 1^st 2015, VAT law across Europe changed for e-services (like video-on-demand, downloaded apps and AV software) that are digitally supplied to non-business clients.

From then, it is the location where clients receive the e-service that determines the VAT rate that the supplier must pay (and is responsible for paying), not the location where it is supplied from.

“This has resulted in micro-businesses selling digital products being saddled with a huge administrative burden that has forced many to stop trading,” reflected IPSE.

“Entrepreneurs play a crucial role in delivering economic prosperity, but these regulations hamper their ability to grow their businesses. Digital services are a huge growth area so it is extremely disappointing to see policy working against those looking to grow their businesses in this sector.”