Earlier this month I emailed Vince Cable, expressing concerns on how the new VAT regulations will affect small concerns such as The Alchemy Press, my imprint. Yesterday I received a reply. In the interest of open government, here it is:
Thank you for your email of 6th January 2015 to Vince Cable. Your letter has been passed to HMRC as this Department is responsible for the administration of VAT and I have been asked to reply.
You are concerned about the changes to the VAT place of supply rules that came into force on 1 Jan 2015.
It may be helpful if I provide some background. Previously, intra-EU supplies of digital services (broadcasting, telecoms and electronic services) to non-business customers across the EU were subject to VAT in the Member State where the supplier belongs. As announced at the 2013 Budget, from 1 January 2015 these services are taxed in the Member State in which the consumer is located. This change is important to the UK. It removes a distortion of competition which unfairly favours businesses that locate to a Member State with a lower rate of VAT than the UK. It therefore creates a level playing field for all UK businesses and helps protect UK revenue. UK consumers of these services will pay UK VAT no matter where in the EU the supplier belongs. This change also affects UK businesses which supply non-business customers in other Member States, as local VAT is due on those sales from 1 January 2015.