PM to raise fears over EU tax rules
David Cameron is to take up the cause of hundreds of online "micro-businesses" threatened by changes in EU tax rules.
The Prime Minister is planning to raise new VAT regulations for automated digital services at the EU summit beginning today in Brussels amid fears some small traders could be forced out of business altogether.
British officials said that small businesses selling e-books, producing apps, hosting websites and running online courses were among those which had been hit by changes which have left them struggling to comply.
Under the new rules which came in at the start of the year, VAT is now charged at the rate of the buyer's country of residence, rather than the seller's.
While the move has largely worked to the advantage of the UK, removing the competitive advantage for firms based in countries with lower rates of VAT, it means British firms now have to register for VAT in EU countries to which they sell.
Whereas firms must have an annual turnover of £81,000 before they need to register for VAT in the UK, under the new EU rules there is no threshold which means that even the smallest traders are caught.
Clara Josa, of the EU VAT Action group, said many small operators simply could not cope with the new demands being placed upon them and that urgent action was needed to prevent them being forced out of business.
"The new EU VAT legislation brings corporate levels of regulation and administration not just to the boardrooms, but also to the kitchen tables of sole traders," she said.
"Thousands of the smallest EU businesses cannot physically comply with the data requirements and the costs of compliance are hugely damaging."
Mr Cameron is planning to tackle European Commission president Jean-Claude Juncker over the issue on the margins of the summit in the hope the commission will bring forward solutions by the summer.
"It's a classic example of where the EU needs to be flexible and fast-moving, coming up with a fix before EU red tape has a detrimental effect on traders across Europe," one British official said.
"It is one of the things the Prime Minister has found when he has been out and about across the country talking to businesses. He has had it directly raised with him."
In particular, he wants the commission to introduce a turnover threshold, as well as exempting small firms from a requirement to retain details of purchasers showing where they bought the product for ten years.
The summit itself is expected to be dominated by continuing concerns about Russia's intentions and the separatist conflict in eastern Ukraine.
The leaders are expected to discuss measures to lessen Europe's dependency on Russian gas as well as the need for further sanctions against Moscow if the terms of the Minsk ceasefire agreement brokered by German chancellor Angela Merkel and French president Francois Hollande are not adhered to.
"We think that it important that the EU sends a united message and a signal of intent to Russia that we will not ease up on the sanctions until Minsk is fully implemented," one British official said.