How Many Small Businesses Have Closed Following New EU VAT Rules?

11 February 2015, 14:42

As many business owners will be aware, new VAT rules came in at the start of the year that would affect businesses selling online. Virtual sales are caught up in the net of the new VAT rules, which require that VAT is paid according to which country the buyer is in, rather than the seller. Suffice to say there are many hoops to jump through, some of which seem virtually impossible to get through safely and in accordance with the new rules.

So now it’s been around six weeks since the new rules came in across the EU. What are the results thus far?

According to the EU VAT Action website, more than 200 businesses have already ceased trading owing to the effects these rules have. Consider for a moment a situation whereby an individual is making perhaps £150 extra a week through their online sales efforts. Maybe they’re selling eBooks via their own website for example. Many people in this situation simply cannot meet the new VAT rules without a lot of headaches. As such they’ve closed down because the additional costs involved in meeting the rules mean it’s not worth being in business anymore.

There is also the likelihood of some businesses taking a cut in their sales. Some online businesses have many strings to their bow. If one string happens to incorporate virtual sales they might just cut it loose rather than go through the headaches involved with these new rules. Thus they stay in business but they take a significant pay cut as a result. Remember, it’s against the rules to sell only to your own country and to reject the purchases attempted by people in other countries. And yet this is what is happening in some cases. Even companies in America are now refusing to sell to the EU because of these rules. It’s starting to look like quite a mess, isn’t it?

Indeed the VAT Moss solution (using the term loosely) offered by HMRC was originally given the hashtag #VATMOSS on Twitter. It didn’t take long before that hashtag was changed to #VATMESS by those who were disgruntled at the level of meddling performed by the EU. While it may have seemed like a good idea to begin with, the rules have clearly been put together by people who have no idea of small businesses and how they are run. While governments are keen to say they support small business they are doing the exact opposite by rolling out these ill-thought-out rules. Now we can see the consequences of the legislation we can see that for some sellers, it is no longer an option to be self-employed or to earn a living in this way. That’s a real shame.