Two thirds of SMEs unaware of upcoming VAT changes and penalties - survey

Monday 17 November 2014 14:36 CET | News

Almost two thirds of smaller businesses (those with less than GBP 10 million in turnover) are unaware of the new VAT rules coming in starting 1 January 2015, a recent survey indicates.

Although larger companies are very much aware of the upcoming changes, 62% of smaller businesses did not know about the new 2015 VAT rules, while 66% were not aware of the potential penalties associated with non-compliance.

From 1 January 2015, VAT rules for sales of telecoms, broadcasting and e-services to EU consumers are changing. This means that VAT will no longer be charged and accounted for based on where the business supplier is established, but according to the EU country where the customer belongs. Coupled with this general lack of awareness, the survey also reveals a lack of clarity regarding the potential costs associated with getting ready for the changes.

The survey also indicates that 75% of respondents are considering raising their prices as a result of these new tax rules. More than half predict price rises of between 2 and 3%, while 26% indicate increases of 5% or more.

The survey suggests that, for some businesses, the answer to managing the compliance burden associated with the changes to the VAT rules may be to stop selling to certain customers. Thus, according to findings, 28% of affected businesses are considering limiting sales in particular EU member states to reduce their compliance burden. At present, VAT rates across the EU range from 15 to 27%.

The research, commissioned by KPMG, comprised a survey of decision makers in 156 companies in the online retail, telecoms and media industries during September and October 2014. Respondents ranged from small-sized businesses to mid-sized (turnover of between GBP 10-500 million) and larger businesses (turnover of more than GBP 500 million).

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Keywords: VAT changes, ecommerce, non-compliance, e-Services, EU consumers, KPMG
Categories: Payments & Commerce
Countries: World
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