How much could your business save? Find out now!
Or, you can call us on: 0800 411 8830

VAT: 2016 EU reforms mean new rules and rates


EU reforms slated for 2016 could mean thousands of small UK businesses face a new onslaught of stifling red tape.

Since the start of 2015, UK companies that sell digital services to customers in Europe have been forced to pay VAT according to the laws set by the country in which their buyers live. Even to businesses below the current UK VAT turnover threshold of £82,000 (approximately €115,000) are affected.

But campaigners warn that policymakers in Brussels are planning to extend the new system to cross-border retailers of all types of goods and services as early as 2016, threatening to add another layer of bureaucracy to the VAT system.

Which firms are affected by the new EU VAT rules?

Since January 2015, companies which sell goods and services such as smartphone apps, e-books, music downloads or online training services to consumers in the EU, have been obliged to pay VAT at each customer’s local rate. Companies must collect data about where customers live to ensure they are paying tax at the correct rate.

“The new VAT rules mean affected companies face an increased compliance burden and billing becomes more difficult to manage,” says Amanda Tickel, tax partner at accountant KPMG. “In the first instance, businesses need to ensure their systems can capture the right sort of information to evidence where each customer lives and apply the correct VAT rate.”

 What if my business has no VAT registration?

Companies that turn over less than the current threshold of £82,000 a year in the UK will need to start paying VAT on their overseas sales within the EU but not on sales to UK-based customers.

The VAT mini one-stop shop (MOSS) service allows firms to make a single quarterly VAT payment rather than having to deal with tax officials in several countries.

Sally Beggs, deputy director of indirect tax at HM Revenue & Customs, explains: “The VAT MOSS system means that digital services suppliers will not have to register for VAT and provide a quarterly return and payment in every member state where they do business, reducing the administrative burden of implementing these changes. Businesses that have their main operation or headquarters in the UK will register with HMRC to use the service.”

Until 30 June 2015, smaller firms are allowed to use the information from their payment providers to decide where each customer is based.

But after this date, all companies will have to ensure that location details are recorded with each transaction – adding yet another layer of bureaucracy to the system.

 What if I sell other goods or services?

The reform of the VAT system is aimed at preventing companies setting up in low-VAT countries such as Luxembourg and then being able to sell throughout the EU at lower tax rates. As such it is widely expected that the rules will soon be extended from digital-service retailers to sales of other products.

A spokeswoman for campaign group EU VAT Action says: “These rules are just the first wave of legislation. If you sell anything online, then you are next in the EU’s sights: similar rules are planned to extend to all goods and services as early as 2016.”

The spokeswoman adds that there is currently a turnover threshold of either €35,000 or €100,000 (depending on the country they sell into) for people distance-selling goods across national boundaries before having to register for VAT in that country. “But,” she warns, “this threshold will go too.”

Related Articles

working from home

Can I have a business energy contract if I work from home?

The gig economy is showing no signs of slowing down and micro businesses are thriving, with 76% of UK business...

Read More
New design electricity pylon used in Nottingham

Energy News – 21/04/17

What with the announcement of a snap election and all the ensuing shenanigans it’s certainly not been a quie...

Read More
eco trees image

Earth Day Brainteaser – can you find the footprint?

Can you find the foot amongst the leaves? Challenge yourself with our brainteaser, created to celebrate Earth ...

Read More
Excellent, 9.7 / 10

Very easy

"Very easy. Bea Luseni very efficient & knowledgeable."

This review was posted by Alan Duffy on the 31st of March 2017

Super helpful and easy to work with

"Recommend this company in a heartbeat - Nicole Borneuf was super easy to talk to, was not pushy in the slightest, very helpful and replied with all my questions very professionally and did all she could to help. I had to deal with a few companies to sort my business energy out, all but Nicole were too pushy for my liking and I refused to follow through with them. Thank Nicole - you are a credit to your company, thank you for making the stressful energy change so easy."

This review was posted by Mia Drew on the 29th of March 2017

An Extremely Competent Company

"Switch my business has not only helped my SME secure a good energy deal for the second year running but Jessica swiftly found a alternative supplier for me when I was let down on the day of switching by the new contractual provider I had chosen some 4 months previously. Being suddenly out of contract and without provider is everyone's energy nightmare. Greatest thanks."

This review was posted by S McMillan on the 29th of March 2017

Helpful, friendly and we saved lots of money!

"Jessica Purnell was helpful and friendly, she made the whole process easy and simple AND we saved lots of money thanks Jess"

This review was posted by Melanie Baker on the 23rd of March 2017

Quick & Easy

"Kabibi was very helpful and the whole process was very efficient. The one small reservation I had was that I was phoned up by Kabibi almost immediately having received my online quote - which wasn't enough time for me to finish reading the quotes! Fortunately she was able to assist me in a greater savings on both Gas & Electricity, and so as long as the switchover is seamless I will remain very happy with the service."

This review was posted by Amanda Brown on the 21st of March 2017