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Clear as mud – HMRC’s new VATMOSS guidance

I am beginning to think that HMRC couldn’t actually spell “clear” or “helpful”.

This afternoon, after much waiting, anxiety and in some cases actual tears, HMRC released their much-vaunted “new guidance” for micro businesses affected by the VAT MOSS rules.

This post from Enterprise Nation explains it. And makes it sound like they have fixed all our woes.

They haven’t.

These ‘fixes’ are simply bad rewrites of what we already knew, what had already filtered through.

But this is not good enough.

The jaded cynic in me believes, now, against my unicorns-and-daydreams hopeful and sunny side, that they have spotted people opting out of the traditional 9-5 drudgery in droves, and this is their way of stopping it.

The rational and sensible human in me can simply see that they just DON’T HAVE A CLUE. (a dear friend suggested to me some time ago that what I was in need of is a cluebat. To hit people with when they don’t have a clue. Oh, what I’d give for one now).

HMRC, may I present A Brief Guide To The Internet in 2014 (and no, it’s not liable for VAT because you’re in the UK and so am I. Plus I’m a generous soul and I’m giving you this lesson for free. I won’t even add a sales pitch at the end):

You may not have come across it before, in the cushy caves in which you appear to reside and work from, however “the internet” is this magical thing, commonplace in the modern world, which enables people to communicate digitally. No telephones, no mail, no pigeon. It’s almost instant, and it is universal. Worldwide. No barriers.

Via the wonder of “the internet”, we can do such things as contact each other by email, read other people’s writings and watch videos of cats. However, crucially, it also enables business to take place at previously impossible scales (both ends of the scales).

What makes this possible, in the UK at least, are two things: automation and the UK VAT threshold. 

Automation means that once created, a product can be sold over and over again, without any intervention from the business owner (except for updates). As I have stated before in my letter to Vince Cable, the vast majority of what is sold is either too low priced, or too labour-intensive to create, to be worthwhile if we also have to be personally involved in every single purchase.

Instant payment + instant download = happy customer = business growth = shoring up the economy. Win win all round.

So a mum of 3 can write, scan and sell knitting patterns, enabling her to spend time with her children and save money on childcare while providing a small income for luxuries. She can use the rare time when her children are asleep to work on new patterns rather than the tedious and old fashioned admin of sending out purchases by hand.

A young single woman can supplement her day job without having to work in a pub or restaurant after a 9 hour day. This means she can put a little by for her house deposit and emergencies. She also has caring responsibilities, and automation and “the internet” mean she can fulfil those without having to take a pay cut from her day job, or spend her precious and limited free time sending out USB sticks containing training videos videos she is unable to deliver online without being liable for VAT and the data collection that goes with it. (are you beginning to see how ridiculous this is yet?).

A man who can’t get a normal job due to chronic health issues is able to stay off benefits, because he can create pre-made logos for small businesses which they can buy and implement without any input from him. This means that when he is in hospital for regular appointments, his tiny business doesn’t suffer from customers being unable to receive their purchases until he is home again. Like the other two examples, he cannot spend his limited time on admin, he needs to spend the time he is well enough to work on generating income, not on extensive admin.

All three of these businesses turn over less than £5,000 a year, and have registered with HMRC despite thr government’s apparent lack of understanding of what they do, because they WANT to do things right and trade within the law.

The VAT threshold is in place to ensure that businesses can start, innovate and grow, without drowning in admin and rules and red tape and bureaucracy before they even get off the ground. That we can keep our UK threshold is great – but that we have to submit a nil return and MOSS returns even if we only sell one thing to the EU is utterly, utterly senseless – and we cannot physically collect the data that you require from us.

One of my own businesses is a physical stationery subscription box company (i.e. actual parcels in the actual post) and we have had several customers whose addresses are not attached to their PayPal account. Let me remind you that this is for something which is PHYSICALLY SHIPPED to them. One or two of them were extremely hard to contact to get the address for a product they had already paid for, because their PayPal-registered email addresses were also void.

We cannot comply with your demands – and anyone with a modicum of understanding of what we do should grasp that. If you didn’t know before, you certainly should now, after the excellent posts, campaigners and meetings you have had.

That magical thing we call “the internet” has facilitated income and a sense of purpose for hundreds of thousands of people who wouldn’t otherwise be able to earn their living. They don’t want to be on benefits, they don’t want to be just another statistic.

The VAT place of supply rules have given me no choice but to pull the web design course I have spent months creating – I don’t dare accidentally sell to the EU and I can’t guarantee I would have the correct information, stored on an EU server, in any case.

The “clarification” you issued today clarifies only two things – that you don’t care about tiny businesses, and that despite being responsible for taxing us, you have absolutely no concept of the true state of online enterprise in the UK – at the smallest scale.

Our representatives and yours have been at the same meetings – and it is overwhelmingly evident that you haven’t listened to anything they’ve said.

I wait in hope for the exemption and threshold we have asked for and a further and better response from Vince Cable.

photo credit: GrungeTextures via photopin cc

(Disclaimer: this post is my opinion, borne of frustration and disappointment in the powers that be to protect something I’ve worked so hard for. The scenarios are an amalgamation of scenarios of real life businesses I have seen unfolding in past weeks, details changed to protect their identities.)