Labour MEPs: UK must work with Commission to secure faster, higher VAT threshold for SMEs

The European Commission has announced the re-introduction of a VAT threshold for e-commerce businesses operating across the EU. The new threshold has been set at €10,000 (£8,400), 90% lower than the UK’s £83,000 (€99,000) threshold.

A new VAT system, levied on where customers rather than suppliers are based, was introduced on January 1st 2015 to prevent aggressive tax avoidance. However, the system did not accommodate the varying VAT thresholds in EU countries, causing some British small and micro businesses to suddenly find themselves subject to VAT for the first time.

The new threshold will pull many SMEs who do limited trading across the EU out of the VATMOSS system, however the threshold is not due to come into force until 2018 for e-services and 2021 for online goods, leaving many UK businesses unable or unwilling to operate across EU borders.

Anneliese Dodds MEP, Labour’s European Parliament spokesperson on taxation, said:

“I have been calling for a VAT threshold because it will provide reassurance to many small businesses that they can continue to trade across Europe without fear of accidentally evading tax. The VAT announcement should have been something for businesses and stakeholders to welcome, but the delay in implementation is unacceptable, and leaves many small businesses in exactly the same position.”

“These new regulations will affect all businesses that trade across the European Union, and will affect Britain after Brexit, whatever our relationship with the EU, whether we’re in the Single Market or not, and members of the Customs Union or not.

“The government needs to use its influence now, while it can, to bring forward the implementation of the threshold and to raise the threshold level.”

Ms Dodds added:

“I am frustrated that the Commission has allowed many of these businesses to sit in such uncertainty for nearly two full years, and that the threshold could take a further four years to be implemented.

“Labour MEPs have been calling for a threshold to be introduced throughout this process and I do not understand why there has been such a long delay in its introduction. It is also at a much lower level than the UK rate, which will cause some continued administrative pressures for small businesses trading across Europe.

“The Commission and UK government must work together proactively, now and during Brexit negotiations, to establish easy access for the many small businesses that want to trade with their European partners.”