Meltdown for small businesses as new VAT rules hit hard
'…we predicted, and feared this, says UKIP's Margot Parker…'
Reports that small businesses are closing due to the new EU digital VAT rules introduced at the turn of the year have been met with dismay by UKIP's Margot Parker.
The party's East Midlands MEP and small business spokesman warned at the UKIP conference in Margate in the spring that small businesses would be hammered by the controversial VAT MOSS rules, which were introduced in January.
Now, her worst fears are being realised as just six months into the new set-up, reports show micro-businesses are closing down.
She said: "This was our fear all along – just a few months down the line, small businesses are being seriously harmed.
"We are hearing of closures and hardship – exactly as we predicted and feared and exactly why UKIP was opposed to this legislation.
The VAT MOSS plan was to move the place of supply for VAT on digitally-delivered services to the customer's location. It stopped the biggest businesses profiting unfairly from locating in lower-VAT regimes.
But it has caught small businesses in a trap which has proved too much for many of them.
Eurocrats were informed small businesses never sold digital goods direct to customers – only through third-party platforms – and did not sell internationally – though the internet has no boundaries.
A report in The EU Observer said the rules were extremely complex and involved micro business owners having to access the data required to prove the place of supply, then compare them automatically during the sales transaction.
The MEP said: "It's absurd – and has just led to the smallest businesses abandoning their digital strategy entirely.
"It's too complex, too messy and simply not worth their time – which is precisely what we in UKIP were saying months ago."
She has called for an immediate suspension of the rules for small businesses and a new structure to be put in place and is writing to the EU commission to voice her concerns.