New regulations designed to take more VAT from online giants such as Amazon will place extra burdens on small businesses.
And it means niche companies who use the internet to sell items such as knitting patterns or music downloads for unsigned artists without the huge overheads, may go under.
From January 1st, all companies who sell online to the EU will be forced to register for VAT which is one way Brussels earns income without going to national governments with a begging bowl.
And even micro businesses which sell anything to EU customers will be forced to comply even if their turnover is under the £81,000 threshold used for registration in the UK.
One online business owner told The Telegraph:
“I had planned to launch an e-course in January. Though I’ve worked on it for months, it now falls under these rules. It’s simply not worth the extra time and hassle for VAT compliance. In one fell swoop, HMRC is stifling innovation and cross border trade, and forcing people to close their businesses.”
The Federation of Small Businesses have admitted some of their members are “very worried” about the changes.
John Allan, the FSB National Chairman said: “Although these changes are an important part of the battle to make large companies pay their fair share of tax, they are proving a shock for some small firms who are trying to build exporting digital businesses. We are already hearing from members who are very worried and want to know what to do about it.
“Those not already registered for UK VAT, will face hassle and extra costs. It’s important the burdens of the new arrangements are minimised and firms are given the support and advice they need to weather the changes successfully.”
The British government had tried to stop the regulations but in the end had to admit their failure.
A spokesman for UKREP, the Permanent Representation in the EU, said “The UK argued strongly for cross-border threshold so that the smallest businesses would be outside the system, there was no support from other Member States or the Commission.”
And they admitted the limited influence the UK has in EU negotiations, telling MEPs, “We have to be realistic here. We can’t do anything without a proposal from the EU Commission and the unanimous agreement of all 28 member states.”
UKIP small business spokesman Margot Parker said “This new Brussels tax grab will without doubt force thousands of micro-businesses to shut down.”
“The new system begins on January 1st. For weeks now, the Treasury and Revenue have been assuring worried micro entrepreneurs that Government negotiators would secure a better deal for them in Brussels.”
“Today we see those assurances have been worthless. The regulations, meant to stop giants such as Amazon taking advantage of the tax-haven the new Commission president Jean-Claude Juncker set up in his home country of Luxembourg when he was prime minister, may now sweep up and destroy thousands of small businesses. These businesses, which often operate out of the spare room of a family home, sell everything from knitting patterns to digital novels to self-help courses to apps to herbal supplements online.”