My New Business Plan
This week I intended to blog about my experience and renewed business planning from the Flourish programme event that I attended from Thursday–Saturday last week.
The 3 packed days of business development was a really illuminating experience. I had a great time connecting and sharing stories with my fellow mentees and it felt so valuable to take 3 days out of the business to work on, rather than in, my business.
Unfortunately, I was brought back down to earth with a bump on Tuesday when I read the new VAT rules for trading in the EU. HMRC will offer an online service called the Mini One Stop Shop (MOSS) to make reporting as simple as possible.
The catch? There will be no more VAT threshold.
How VATMOSS Killed it Before I Began
Basically, from 1 January 2015, if you want to sell any form of B2C supplies of digital services (broadcasting, telecommunications and e-services) to any individual consumer in the EU, there will be no VAT exemption. The UK is the only EU country with optional VAT threshold, which is currently set at £81k.
Since the business plan I had formed over the weekend away was based heavily around creating online resources like ebooks and ecourses for a specific customer type (creative freelancers), it throws my plans quite significantly. Since I cannot predict whether my customers will be based in the EU, now it is only financially worthwhile to offer this service if my sales outweigh the cost of VAT accounting.
While VAT MOSS is optional – you can choose to reg for VAT in countries in which your customers are based – there is no way to configure a sales mechanism based on the country of origin. Whether you intend to sell the the EU or not, or every sale you make to an EU-based customer, you need to pay VAT. Even if it’s a single 99p ebook.
In practice, this means filing quarterly VAT accounts, accruing accounting and administrative costs that, for many microbusinesses, will immediately outweigh sales.
Surely there’s another way, right?
Well, kind of. The other option is that I send my new customers away from my online shop to Amazon or Apple or another ebook retailer, where the retailer takes a significant margin and the customer is no longer in the comfy and trustworthy environment that I’ve worked so hard to build for them.
Bully for the big guys, eh?
How VAT MOSS Affects Small Business
Now, as the above suggests, mine is far from the only business to be affected by these changes.
Potentially thousands of microbusinesses will be shut down on 31 December.
It’s all interconnected – these are exactly the kinds of businesses I was setting out to help, work with, and educate.
The VAT exemption exists to protect small firms, and the new ruling creates a massive barrier to entry for microbusinesses.
So What Now?
For now, I’m planning to go ahead with my content creation strategy, but there will be a massive hurdle to overcome when this ruling comes into place on 1 January.
Until then, I’ve signed and will encourage you to sign the Petition to Uphold the VAT Exemption Threshold for businesses supplying digital products. At the time of writing, this has 7,367 signatures of its goal 7,500.
What are your thoughts on the VATMOSS ruling? Will it affect your microbusiness? How are you planning to deal with it?
I’ll leave you with some links I’ve found useful in navigating the VATMESS.
- EU VAT Changes 2015 – What You Can Do – Rosie Slosek, One Man Band Accounting*
*I found this one particularly helpful, and it contains several more informative links.
- How #VATMOSS is the end of small enterprise in Britain – and how we can change it – Heather Burns, Idea 15 Web Design