The impossibility of a "simple technical solution" to the VAT MOSS mess

The VAT MOSS issue continues to fill my inbox on a daily basis, with a cascade of nonsense occurring as we pass the first reporting deadline. However the voices of small businesses have been heard due to the amazing work from the EU VAT Action team. An exemption or threshold isn’t likely to help my business but will remove this horrible barrier to entry for new businesses. I’m fully behind that.

However, rather than supporting these efforts, Enterprise Nation continue to bang their drum about an easy tech solution. They appear to believe that all that is required is a few developers to sit down for an evening and VAT MOSS will be solved, by way of our mystical coding powers. I’d suggest that if it were so easy to fix the problem then we’d already have good solutions, and I’m concerned that this nonsense is being given credibility by people who have the ability to derail the campaign for an exemption or threshold.

The difficulty of creating any solution

Even creating a bespoke solution to the VAT MOSS issue is relatively hard.

We were in a better situation than most, we’re web developers so could do the work ourselves, and I have a strong understanding of the issues involved. We were also already VAT registered and doing Reverse Charge EC Sales, so had part of the infrastructure in place. Doing the work and testing the systems took us most of December 2014. Even ignoring all the research I had done into the issue, had we been charging for that work, or had to pay a developer, a figure of around £10K would not have been unreasonable.

The difficulty of creating a universal solution

If you build a bespoke solution for your business, as we did, then you can ignore any part of the requirements that don’t apply to you. For example we don’t need to worry about multiple VAT rates, we don’t sell anything that attracts a reduced VAT rate. We don’t have mixed physical and digital product sales. That meant we could cheerfully ignore writing the code to deal with multiple possible VAT rates and products at different VAT rates.

If you try and create something that is for all possible types of business, you have to fully comply with the entire legislation. An incomplete list includes things like:

  • displaying product pricing with the correct VAT included, a requirement for B2C Sales
  • coping with different digital products in one store having different VAT rates
  • coping with a store having a mix of items, physical and digital. Some of which won’t attract VAT MOSS and some which will.
  • be able to identify B2B sales to EU countries and deal with reverse charge VAT
  • giving non-technical users a report they can use for VAT MOSS and also standard VAT reporting
  • invoicing according to the VAT legislation of all member states
  • dealing with currency conversions when creating those reports
  • storing all the data for 10 years as proof the right amount of VAT was charged

In addition, a universal solution aimed at the small businesses struggling with this needs to:

  • be as simple as PayPal Buy Now buttons
  • not require any specific language on the server
  • be very, very inexpensive – we’re talking people selling stuff like a few knitting patterns here. Not software businesses.
  • work with all the different payment methods people are using
  • work with all the different website and store platforms people are using
  • provide confidence to users that the stored data is safe, and that they are indeed fully compliant as ultimately the responsibility lies with the business owner.

This last point is I believe why we have few solutions at this point. How we are supposed to comply is unclear, and at times impossible. Building your own bespoke solution you essentially make and document decisions made for your business. If we get pulled up on any of it, we’ll argue we were doing the best we knew how with an unclear situation. If you provide a solution for others you need to know you are absolutely doing the correct thing. It would be completely unethical to do otherwise.

The expense of providing a solution

Any solution operating on a wide scale is going to need to be SaaS – along the lines of what Taxamo offer. That’s going to involve a certain amount of infrastructure right from the get go. Customers are going to have to pay a transaction fee to cover the infrastructure, support staff plus the business will want to make a profit. That’s going to make a solution people are willing and able to pay for when they are charging tiny amounts, not really profitable as a business concern.

The sheer scale of support such a solution would need

Even if it were possible to build a solution, I think the sticking point will be technical support for such a thing. Our products are aimed at technical users – our requirements page lists the skills needed. Yet we spend a huge amount of our time supporting users.

Any “simple” solution for VATMOSS is going to be aimed at non-technical users. The sort of people who set up a blog and add PayPal buttons to “Buy Now”. This product will need a support team. A support team who are reasonably technical, and who understand all of the different systems and payment services that users are running. They will also need to be able to explain VAT to people who have just been forced into registration. Many of these businesses have never dealt with VAT on any level before and will have little understanding of where their responsibilities end and the solution provider’s begin.

I wouldn’t advise anyone to go into that as a business.

Sensible advice would be to target a very specific section of the market – as people already have done. For example creating a WordPress and Stripe implementation for people selling downloadable products only, at least then you have known issues and can become expert in supporting them.

Enterprise Nation and friends are naive at best if they think that a solo developer, attending a hackathon for a chance at a £1K prize, will be set up to develop and support a solution for all UK businesses. Given they have not published a specification for the work, or details of exactly how the winning solution will be judged I doubt they have the technical ability to assess which half-baked in 5 hours solution could have legs anyway. What is needed for true micro-businesses is a workable threshold or exemption, removing them from the issue altogether. For the rest of us we need clear legislation, in order that we can be sure the money we are putting into our implementations is not wasted. This sort of nonsense is just a distraction from that campaign, and potentially derails the campaign by making it appear that a quick and easy solution can be found.

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Matt Burns on the 06 May 2015:

Couldn’t agree more. I’m tempted to go to that hackathon just so I can rant. We don’t need more hacks around poorly implemented legislation, we need to fix the legislation.

A few months ago I open-sourced my EuVatBanner which basically just appears at the top of websites telling customers from the EU (outside UK) that they can’t use this website! If everyone used my “solution” then the legislation would get changed pretty quickly ;)

Guy on the 06 May 2015:

Exemption would certainly make a lot of sense – and be more in line with the “normal” VAT rules of only needing to register above a certain threshold. My first MOSS return was for a mere £17.80 in EU VAT but the hours of leafing through statements for Stripe and Paypal transactions cost me many hundreds in non-billable hours. Thanks for all the work you do in this area, Rachel!

Carlos on the 06 May 2015:

Hi Rachel! Thanks for this article. 100% agreed with you. There’s a lack of simple technical solutions for non-technical people to manage the VAT nightmare. That’s why we’ve been working on Quaderno to launch a solution as simple as the PayPal buttons and a couple of weeks ago we launched Checkout for PayPal, Stripe, and Braintree (https://quaderno.io/features/checkout-for-paypal/). With a simple snippet of HTML code, users can be fully VAT-compliant. Hope this help a little bit.

Astrid on the 07 May 2015:

Great article, Rachel. In the past I have read several articles clearly written by people who did not research the matter as detailed as it requires – the result are superficial recommendations which dissolve as soon as they are put to the test. We need a quick European solution (an exempt or an agreed threshold) which benefits everybody – the EU VAT Campaign is the only platform to drive this forward.

Holger on the 07 May 2015:

Great article/rant, I could not agree more – there are no simple technical solutions!

Today I had the first case of “VAT fraud” where a German customer was pretending to come from the US so that my checkout system does not charge him the ~7 Euro VAT.
While I could improve my system to rely stronger on the location proof before doing the checkout I am certainly not interested in building barriers to hold back my customers from buying.
So I end up paying the VAT out of my own pocket so that everything is with the German tax authorities. Fantastic!

Ian Tresman on the 12 May 2015:

I have a simple Paypal “Pay Now” button. Vatmoss requires that I replace it with a dozen Pay Now buttons, one for each EU tax rate zone.

If that was not problem enough, Paypal will not provide me with customer residency information to prove place of purchase, because of privacy law.

I have stopped accepting EU payments since 1 Jan, because there is no cost effective solution.

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