Important stuff for everyone to be aware of - the new EU tax laws will impact your profit margin (unless you raise prices). e.g. UK VAT % from 3% to 20% and Germany, Italy and others also up. Amazon will do a one off change for everyone to be VAT inclusive but you'll need to be aware for publishing in 2015
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- I am not a tax specialist, so this is a suggestion to seek advice not advice:
It might not affect most people, but if someone sells direct to the EU (e.g. via their website) they will have to account for the VAT on each of those sales.
It is possible to register for MOSS via HMRC so international VAT is paid as a single bill with UK VAT; however, the threshold for MOSS appears to be zero, so - even if you are not making enough to pay VAT in any country - you might have to submit a return anyway if you could sell to another EU country.Dec 2, 2014
- Thanks for covering this.
Unfortunately, the way the regulations are phrased, as it stands, the burden of proof is to supply 2 pieces of incontrovertible evidence that you haven't sold to any particular EU member state. There are some problems with this:
- Each member state can demand, individually, from you said evidence;
- The HMRC guidance as to what constitutes the location of supply is unclear and contradictory -- both pieces of advice contradict the EU guidance -- and no one is willing to state that their advice can be considered definitive;
- If you make a mistake, the fines are unlimited, even if you are following guidance;
- The time and resources required for compliance, for a small digital business, is prohibitive;
- Said evidence doesn't exist in the normal course of business.
As Dave mentions, above, you can use MOSS and the threshold is zero, so selling a single ebook for 99p puts you into the requirements, and as the individual countries can demand evidence that the ebook wasn't sold to someone in their country (this doesn't go through MOSS), you have to keep that evidence for the normal 10 years -- that would be the evidence which does not exist, mind.
I have no particular problem with the idea behind this regulation, but the implementation is complete pants.
Unfortunately, for many small businesses, especially those operating below the normal VAT threshold (including mine), the only course open is to close the B2C/direct sales aspects of the business until this mess is sorted out.
I'll be shifting focus to other avenues, but the editorial & freelance writing services are gone as of 10-Jan-2015. Many other new businesses don't have multiple income streams and so will have to close completely. New startups will find the barriers to entry prohibitive, and will likely not even try.
Ah well. </rant>
KDec 3, 2014
- Simple answers,and : sell our ebooks via Amazon or Payhip, who can comply with the new EU madness; or have a disclaimer on our sites for customers to tick: 'I declare that I am not a resident of mainland Europe (the UK excepted).' An accountant friend tells me that will work, until Jan 2016, when everything changes again.Jan 12, 2015
- Thanks, John, but your suggestions are not new. They've been discussed many times before.
Works for books. Doesn't work for other products (such as courses with a direct download component), or services (which do not necessarily have a significant human intervention). It doesn't work at all if you sell direct from your site. The self-declaration is not sufficient, HMRC have already stated that.
HMRC has stated that they will take the country code as proof of country of supply for the next 6 months-ish, but you still need to collect that data. You still need to register for VAT at zero rate, and register for VATMOSS, stating your zero rate.
You still have to do quarterly returns to the MOSS and HMRC, and though HMRC have said that they will deal with any complaints from other member states, they other member states do not all agree with HMRC on the definition of what "significant human intervention" is, nor what is included/excluded.
Remember, you must hold the data that you collect for 10 years, and you are proving the negative; that means you must show (for each member state) that you have not sold into their territory.
After June, the full burden of information is back on the table. That consists of 2 pieces of non-contradictory evidence (meaning a minimum of 3 pieces to provide 2 which agree). Those pieces of data (even if the member states agreed on which were acceptable) are not available before the checkout.
If your accountant friend is willing to sign something to accept VAT liability, then by all means take their advice. However, I must say that several other accountants within the EU VAT Action group, HMRC, and the EU Commission all disagree with your accountant friend.
I would point out that everything I've said above applies even if the business (like mine at the moment) is not above the UK VAT threshold. The threshold for MOSS is zero. Sell anything, and you have to start that paperwork trail.
I would suggest that finding out a bit more about this legislation would come under the heading of due diligence.Jan 12, 2015