*If you’re checking back for updates and further links, I’m adding them to the end of this post so please scroll down*

Ah, the law of unintended consequences. You really would have thought legislators would know about that one. Apparently not. New VAT legislation to stop the likes of Amazon sneaking round their tax liabilities has a massive flaw. The turnover threshold is set at £0 which means small online retailers of ebooks and other digital products will have to compile VAT returns including details of the countries where each and every customer is based.

There’s more information at Cheryl Morgan’s website since unsurprisingly, this will make life for Wizard’s Tower Press untenable. Which will make earning any sort of income significantly harder for me and all of her other authors.

Just to give you some idea of how bad this is, Cheryl says –

The implications for any small company selling digital products are so horrendous that the Head of Tax at the Institute of Chartered Accountants (England & Wales) has apparently suggested that small businesses stop selling in Europe to avoid all of this mess. Except, how can you? The digital world is global by nature. The better-written platforms, such as Amazon, will at least allow you to block sales via their EU-based sites. However, there’s nothing to stop someone in, say, Finland, buying one of my books via Amazon US, or Amazon UK. If they did, I may be legally obliged to account for that, and Amazon’s systems don’t give me enough information to do that.

There is an online petition asking Vince Cable to maintain the existing VAT threshold, which will mean big companies who can afford the staff and systems to do the admin will pay a fair rate of tax while small business will still be able to trade and to grow without this dire limitation on how they can trade online.

There’s also a Twitter campaign today 25th November using the hashtags #VATMESS and #VATMOSS. If this concerns you, please help get this issue trending, to alert the government to the scale of the problem they’re about to create.

26th November – Edited to add links to some good articles I came across during yesterday’s Twitter campaign

How VATMOSS is the end of small enterprise in Britain – and how we can change it from Heather Burns, web design & ecommerce law expert.

A retired tax inspector’s verdict “badly thought out, badly explained, and badly handled”. from Wendy Bradley.

What is this VATMOSS mess? from the Satago Blog.

New EU VAT regulations could threaten micro-businesses from The Guardian.

Other things that came up as a result of Twitter exchanges –

No one, not even HMRC, has any idea how this will apply to crowdfunding such as Kickstarter.

Apparently HMRC talked to a ‘small business consultative group’ about all this to satisfy consultation requirements. No one seems to have any details about who was part of that group though.

This notion of sufficient consultation completely misses the point that most small and especially online businesses won’t actually belong to any professional or other organisations who might be expected to represent the reality of their trading models.

And as Cheryl Morgan has pointed out, the HMRC definition of ‘small business’ means an enterprise capable of providing a living for one or more people. This excludes vast numbers of ‘micro-businesses’ which are run from home, predominately online, as sidelines or to fund hobbies. For instance, a lot of people selling their knitting and embroidery patterns reckon they will be shut down by this.

Apparently HMRC reckoned 34,000 businesses would be affected. Estimates in the newspapers and elsewhere are around 350,000.

Those with experience of HMRC data handling and administration cannot believe they will be able to handle the new workload. Even at the lower estimate.

27th November

Knitwear designer Ysolda Teague attended a seminar about this yesterday, with a representative from HMRC present to answer questions. She reports back in her blogpost here, and also has further useful information. (If you’re a knitter, check out her patterns while you’re at her website!)

There is a Twitter Clinic scheduled by HMRC between 3:30 and 5pm today 27th November. (So slap in the middle of the school run for mums working from home and useless for anyone with a full time job who runs a digital side-business in the evenings and at weekends.) Direct your questions to @HMRCcustomers.

28th November

I’ve summarized the gleanings from that Twitter clinic in the post following this one.

Do also read the ‘Modest Proposal’ blogpost by a retired tax inspector, Wendy Bradley linked in the pingback in comments below.