Hitherto, the UK has had a threshold for mandatory VAT registration: if your VAT-able turnover (sales within the EU) exceed the threshold, you must file a VAT-1 and register, but if your VAT-able sales are below the threshold (e.g. you do B2B sales to customers outside the EU -- which aren't VAT-able -- or your turnover is just plain low) you aren't required to register. As of the current time, the threshold is £81,000 per annum turnover: arguably, if you're turning over that much, you can bloody well afford the bookkeeping costs.
Unfortunately not all EU countries have a lower threshold and the new arrangements have a lower threshold for mandatory VAT registration of any amount -- a single €0.99 sale in Estonia and whoops, you need to be registered to collect and pay VAT in Estonia or via your own tax authority's One Stop Shop.
If the £81,000 threshold applied to the new arrangement, nobody would be shouting. But as it is, this will kill a huge number of spare bedroom businesses and start-ups.
In the UK at least it's not difficult or expensive to register for VAT, but it is yet another barrier. Bear in mind that registering a company is trivial in the UK compared to some other countries.
I registered my small business for VAT voluntarily when I was bringing in much less than 81k since I found that larger companies wouldn't deal with me if I wasn't VAT registered. Since I already had an accountant and used software for my bookkeeping the effort and increase in costs was negligible.
What is difficult is charging a different VAT rate for every non-VAT registered individual in every country you sell to.
Would of course be done through a service. Maybe it's time for these "innovative" payment processor to actually be innovative and provide this service.
"£81,000 threshold applied to the new arrangement"
It can't apply to the new arrangement since you are now paying taxes in the customers country.
It seems that you would just either do your local sales as before and your international sales through a service or start two companies. That why you should be able to keep your threshold for domestic business. (Don't quote me on this though since I'm not in the UK)
Unfortunately not all EU countries have a lower threshold and the new arrangements have a lower threshold for mandatory VAT registration of any amount -- a single €0.99 sale in Estonia and whoops, you need to be registered to collect and pay VAT in Estonia or via your own tax authority's One Stop Shop.
If the £81,000 threshold applied to the new arrangement, nobody would be shouting. But as it is, this will kill a huge number of spare bedroom businesses and start-ups.