Any sale made, even if it is for $0.99 or £1 will require compliance and registration with the VAT Mini One Stop Shop (VATMOSS), if you are UK based sole trader or business.
In the UK, VAT registration has previously only been required when businesses reach £81,000 in a 12 month period.
These changes may leave many small, microbusinesses who sell e-books and e-courses asking whether the complexity and cost involved in complying will make it viable for them to trade in 2015.
There are more details on these changes on summary page from the ICAEW.
What is going to be covered by this tax?
The HM Revenue and Customs (HMRC) definitions of e-services are include:
- Video on demand
- Downloaded applications (or ‘apps’)
- Music downloads
- Gaming, e-books
- Anti-virus software
- Online auctions
Who is going to be affected?
There are three main scenarios for the Jan 2015 changes as outlined by PWC.http://ebiz.pwc.com/2013/01/eu-2015-vat-changes-to-eservices-the-keep-it-simple-edition/
- Any company selling to a non-EU customer is not affected
- Non-EU companies selling to EU customers – VAT due at place of customer
- EU companies selling to EU sellers – VAT will be due at the place of the customer
Small businesses and sole traders who have been able to reach a global audience with their products and services may be faced with refusing to make sales to the EU if they do not want to become VAT registered.
Judith Morgan has an excellent summary of the options for how non-VAT registered businesses can operate from January 2015.
Andrew Grey from words that change the world also outlines the changes in some detail and works though different scenarios.
Data collection and data protection
In order to comply with the sales regulations you must collect two pieces of ‘non-conflicting’ evidence. Accepted pieces of evidence include:
- The billing address of the customer.
- Their IP address.
- A mobile phone SIM card country code.
- The customer’s bank details.
- Other commercially relevant information, i.e. loyalty cards.
There is a further complication if you do collect and hold this data with UK companies potentially needing to register with the Information Commissioners Office.
If you are selling through a third party site, such as Amazon or iTunes, then they will have to comply with the VAT data requirements and tax charges. In this instance you won’t have to hold this data for each individual sale.
What can you do?
Start considering your options. Read Rosie Slosek from One Man Band Accounting’s excellent article about your options and what action you can take.
Follow Rachel Andrew’s GitHub pages site where she is collating information on how people are going to cope with implementing these changes.
Sign the petition and get involved in the Twitter campaigns to get the government to revisit the threshold levels.
Seek advice from HMRC and your accountant.
Please note that this article contains an overview of my own research on this topic. It is not intended as either legal or financial advice. If you would like more advice on how this may affect you or your business please seek advice from your lawyer/accountant.