February 17, 2015, by Kelly Cookson

Were you aware of new EU VAT regulations for exporting digital products and services to Europe?

On 1st January 2015, VAT thresholds were changed for UK businesses exporting digital products and services to Europe. Previously, businesses selling under £81,000 worth of products a year were exempt from paying VAT. In light of this, in the December 2014 Business Barometer survey, our panel of UK SMEs and business advisers were asked whether they were aware of these changes to regulations.

We also asked whether they thought this would have a positive or negative effect to gage the impact of the change upon their business.

The responses from small business owners were as follows:

Were you aware of new EU regulations for exporting digital products and services to Europe?
Yes	18.8%
No	78.3%
Not sure	2.9%

 

To what extent will these changes impact upon your business?
It will have a substantial positive effect	0%
It will have some positive effect	0%
It will have no effect	55.1%
It will have some negative effect	11.6%
It will have a substantial negative effect	1.4%
Don’t know	4.3%
Not applicable	27.5%

Results show that, while an overwhelming number of business owners were unaware of the change, many felt the effects would not be relevant to their business or would have no notable effect. Mike Hunter, owner of Better Languages, felt that the change would have no effect because, for his business, the VAT would be reclaimable – though ‘an administrative headache’.

One panellist felt that the change would discourage business links with Europe: “This just puts all businesses in all other EU countries into the category of those I will not accept orders from.”

UK business advisers were asked about the awareness of the businesses they advise on the matter:

How many of the businesses that you advise are aware of new EU VAT regulations for exporting digital products and services to Europe?
All	3.6%
More than half	1.2%
Approximately half	3.6%
Less than half	33.7%
None	39.8%
Don’t know	18.1%

 

To what extent do you think these changes will impact upon the businesses that you advise?
It will have a substantial positive effect	0%
It will have some positive effect	1.2%
It will have no effect	21.7%
It will have some negative effect	33.7%
It will have some substantial negative effect	15.7%
Don’t know	13.3%
Not applicable	14.5%

Business advisers felt that their clients, who were largely unaware of changes, would either experience no impact or a negative effect as a result of the change.

Echoing the thoughts of business owners, one commenter voiced that: “This will dissuade small businesses from exporting to Europe because they will have to run a complex accounting operation.”

The UK Business Barometer and UK Business Adviser Barometer surveys are run by the Haydn Green Institute for Innovation and Entrepreneurship. The results of the surveys are instantly processed and posted on their respective websites: www.ukbb.ac and www.ukbab.ac.

Businesses and advisers wishing to contribute as panellists on the project can register via the websites.

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