Electric Trainer

New VAT rules for e-selling in the EU

OK. So e-selling isn't really a word, but if you're selling digital stuff online to EU customers you need to be aware of some new rules. *Takes deep breath...*

Small businesses are being warned about new VAT changes from 1st Jan 2015, which mean sellers of apps, downloads and other e-services to customers in other EU countries will have to charge VAT at the rate within the customer's countries, not the UK rate.

The potential for confusion is enormous (giving rise to the hashtag #VATMESS), as VAT will have to be charged on EVERY sale, even where a UK business doesn't have to be VAT registered within the UK. This is likely to be a challenge for entrepreneurial sole traders in particular.

The VAT 'mini one stop shop' is supposed to help, avoiding the need to become VAT registered in every European country (!).  But you'll still need a UK VAT registration number to use the one stop shop, even if you are below the UK VAT threshold.

It all seems very bureaucratic, but you can read more via these useful links, presuming you haven't lost the will to live:

• gov.uk - Explanation of the new rules
• gov.uk - Some extra guidance
• Registering for VAT Mini One Stop Shop (MOSS)

Fair play to the Daily Telegraph, which has pointed to the challenges for small online businesses, and especially people who work for themselves but sell all around Europe using the internet. You'd have thought the tax people would want to make this simple and straight forward. 

You can read the Telegraph's take on the latest twists here.

VAT help for digital services

Time to come clean: the way VAT works across borders is one of those things I can't quite get my head around.

I understand how VAT is irrelevant if you are working outside the EU, but how does VAT work when you sell to someone in another EU country? The single market is supposed to simplify things, but here it seems to make things more complicated.

Of course, as a trainer I should know everything. But whenever anyone asks about VAT across borders I look at the ceiling while pointing here.

But look! A glimmer of light for people who sell digital services (like apps and e-books) around Europe! HMRC have set up an online VAT Mini One Stop Shop.  The aim is to stop you having to register for VAT in every country where someone buys something from you.

Read a short outline at Gov.uk >>>

Feeling strong? Here's the full Monty at HMRC.gov.uk >>>

Simplified accounting for sole traders (webinars)

I'm often asked by trainees on our self-employment workshops where to get more information about keeping records. The short answer is 'the horse's mouth'.

HMRC have been developing a series of webinars aimed at new small businesses. I've taken part in some of the live webinars and they are very friendly and helpful. I find Twitter is the easiest place to keep on top of what's on offer.

There are two new simplified accounting systems which may be of interest if you're self-employed and have a turnover less than the VAT threshold (£81,000 per year as of April 2014).

The first system is called 'Cash Basis' and allows you to calculate income tax based on what you've received rather than what you've invoiced for.

The second change is the introduction of a couple of flat rates to cover using your home as your business base (or your business base as your home - eg when you run a small hotel and live there too).

The flat rate mileage system for using your own vehicle is unchanged.

All these approaches are optional. You can calculate all expenses the long way round and in detail if you prefer, and you can still base your end of year accounts on invoice dates rather than cash received if you like.

You can watch a pre-recorded video on YouTube about all this. Yes - HMRC has a YouTube channel. Who knew!

 

 

Self-employment and financial skills

There have been a couple of announcements this week which caught my eye and should be of interest to anyone who is going into self-employment, doubly so if you have school-age children.

Firstly, the Office for National Statistics revealed that there's been a sharp increase in people becoming self-employed. Full marks to the Daily Mail for living up to their reputation and finding a depressing angle to this: that people have been made redundant and can't find work any other way.

I'm sure some feel forced into self-employment but in my training I find most people up for it and positive about their future, if a little anxious sometimes.

The ONS announcement has led inexorably to the Sunday papers coming up with 'how to' guides for self-employment.

I spotted two articles worth a quick look - remarkably similar, so probably drawing on some of the same press releases:

• The Telegraph
• The Guardian

Neither article really underlines how different employment and self-employment are. And the differences are not just about the way you earn money, they're about how you run your life. Having said that, they both contain useful tips, as do some of the comments underneath them.

Catch 'em young

The other announcement that caught my eye caused a little whoop and a skip in the air. Financial skills are likely to become part of the school curriculum next year. You can read about it here:

• The FT
• The Guardian
• The Telegraph

At last teenagers will be shown that maths is relevant to everyday life, and that everyone needs financial skills to survive. Tellingly, this will come under 'citizenship studies' rather than the maths curriculum, underlining that these skills are essential for a properly functioning society.

The reason I'm so chuffed to hear this is because I meet people all the time in our self-employment workshops who have no clue at all about how finance works. I don't judge them for it. I was exactly the same until I had to learn the hard way - when I set up my own business 8 years ago. I just wish I'd been told some of this stuff when I was 16.

So here's to the next generation of financially savvy citizens and small businesses.

Apple, Apps and VAT receipts

If you're a VAT-registered small business or freelance you occasionally come up against ignorance or pure willfulness on the part of bigger organisations. 

I love this story about one man's tenacity in the face of Apple's 'have a good day' wall of indifference.

The real problem is that so many people in big organisations haven't got a clue how VAT works, which is why it's such fun when we talk about it in our self-employment workshops.

And small businesses can avoid all the nonsense of collecting piddling VAT receipts by using the VAT Flat Rate Scheme, one of Gordon Brown's better ideas.