The controversial new EU VAT rules finally came into force on 1st January, but with an eleventh-hour amendment added by HMRC to make compliance easier for freelancers and small businesses.

In consultation with business owners and support groups HMRC added a clause giving extra support for the first six months of the legislation’s life, meaning business owners can use information provided by payment processors to determine their customer’s location.

Without this amendment, business owners who are impacted by the new EU VAT rules would need to collect extra information from their customers at the point of sale, a potentially gargantuan task for someone operating their business from a kitchen table.

HMRC’s guidance says:

“UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (MOSS) may, until 30 June 2015, base their ‘customer location’ VAT taxation and accounting decisions on information provided to them by their payment service provider.

This means the business need not require further information to be supplied by the customer. As payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides, the transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.”

The measure is being seen as a temporary one by those campaigning for reform of the new rules. EU VAT Action, a group of nine female business owners who have been spearheading the campaign, said of the last-minute change:

“It’s not perfect. It doesn’t fix the rest of the problems… But it WILL allow more people to keep trading, while we all negotiate a reworking of the rules and a sensible threshold.”

You can read HMRC’s full guidance here, and find out if your business is affected by the EU VAT rules, and if you need to register for HMRC’s MOSS scheme, here.

Image by FutureAtlas