Posts Tagged ‘VAT EU Regulations’

It’s been an exciting few weeks since I last posted. I got flu, which was admittedly less grim than it could have been – it didn’t degenerate into a chest infection for starters, which is a vast improvement on previous years.

The other thing that has happened is that small businesses and creators of digital content have been made aware of new regulations put forward by the EU regarding VAT. Regulations that will be coming into force on January 1st 2015.

The way it’s worked up ‘til now is that a sole trader or creator of content does not have to register for VAT until they are making £81,000 a year. Most musicians I know are lucky to make the price of a few pints of beer in a year, so we’ve pretty much all been exempted. This is because VAT was calculated based on location of supply – so if you sold from the UK, you came under UK law. This meant that under £81,000 a year, you did not have to worry about VAT.

These new regulations mean that instead of being calculated on where the product is being sold from, it is now calculated on where it is sold TO. Where the consumer is, physically, at the point where they make the purchase.

Since all of the countries in the EU have differing VAT thresholds, the decision has been made to set ALL thresholds to ZERO for all digital sales. That’s 28 countries for which you must calculate the VAT for each sale you make, at different rates depending on the countries individual rules.

The other nifty bit of this legislation is that you must obtain several pieces of evidence of your customer’s location. Now, even assuming you are able to obtain this information from your payment handler (say, Paypal) you have to keep this information for 10 years and it must be auditable.

So. Let me just re-iterate, in simple terms, what the EU demands that I do to sell an 89p download of a song to someone in, say, France.

  1. I have to pay VAT at the correct rate to the French government.
  2. I have to obtain two pieces of evidence that say that this person was in France at the time of purchase.
  3. I have to keep this evidence for 10 years. This means I have to register for data protection schemes and to be audited to check that I am keeping the data correctly.

HMRC have attempted to make it easier. It is now possible to register for something called VAT MOSS which is a one stop system that works out the VAT per country and pays it for you. In order to utilize this system however, you must become VAT registered which means filling in a VAT return once a quarter.

Remember, this is for a purchase as small as one 89p download.


I’ve seen a few statements floating around in response to people publicising petitions and generally trying to drum up some resistance to the ill-thought out nature of this whole thing.

“But you’ve all known for six years that this was coming, this wasn’t a surprise”

If only. The big businesses like amazon and iTunes were told. In one of the many articles I read, HMRC themselves state that they reasoned approximately 34,000 businesses would be affected. The real figure is closer to 400,000, many of these small traders or hobbyist creatives who don’t actually earn any real money at all. We all slipped under the radar and no-one thought to tell us. I personally found out via social media. With less than a month until these measures come in, and Christmas in the way, I, along with thousands of others, face some pretty unpleasant decisions to be made about whether I can continue to sell music to any listeners outside the UK.

“Registering for VAT isn’t that bad”

No, I agree, registering for VAT alone probably isn’t that bad. Except that it isn’t just that. It’s the maintaining of private data, two items of evidence per sale, assuming it is even possible to obtain the evidence (Paypal are going to be having data protection issues of their own and they’re not going to be keen to give data away) for ten years, in a state that will pass a data protection audit. Who among the cottage creative industries even has the time, let alone the firepower, to manage this? In one of the multitudinous blog entries about this over the last few weeks, I read time and time again that stay at home mothers are going to be the hardest hit. No stay at home mum is going to have the time for the extra admin generated by this.

“At least it will clip the wings of Amazon and other big tax-avoidance culprits!”

Yes, but at what cost? The cost of thousands of developing start-ups who never even get off the ground because of this? The thousands of sole traders who take one look at the paperwork involved and decide that working for someone else will simply be less hassle? This doesn’t just target the big companies, who can absorb it and have the infrastructure to deal with it. This specifically hits the small fry and in my opinion will have a devastating effect on new industry, as well as damaging the creative arts.

What are the options?

At the moment, the options feel very limited, because there is still so little information and clarity about how this is going to be implemented. I currently make all of my digital sales through bandcamp – they have yet to respond to any communications about what their policy will be regarding this – whether they count as third-party (which would exempt musicians selling through them from the regulations, as the VAT would be dealt with by Bandcamp at point of sale) or not.

There is a lot of argument around that the implementation of this all is the main issue. That the online platforms and payment providers should be the ones to take on the burden of correct VAT payment. I’ve seen other solutions, such as a worldwide VAT exemption threshold applying to all countries affected so that small traders can continue unharassed by the tax office until such time as their turnover means that they become eligible (allowing businesses time to grow before hitting them with this extra burden).

I’m going to leave you with this thought. This doesn’t just affect us creative types, lolling around at home and making music instead of having a real job. This affects ANYONE in the WORLD who sells anything digitally. App developers, comic designers, writers, bloggers, people who develop online learning materials. And in the next few years it’s being rolled out to include ANY physical sales or products as well. Perhaps you liked downloading that album from that dutch band, only wait, they’ve stopped trading outside of the Netherlands because of this. That’s right. This potentially affects you, the consumer, as well.

Because I’m not very good at this, (and plus I’ve wittered on enough already) I’m going to sign off now, but leave you with some links for further reading, and, at the top of the list, a link to an EU-wide petition to try to get the EU to at least reconsider how they are implementing this. I urge you to sign it, share it and tell people what is going on.

Thank you for your support.


Further reading



Please use #VATMOSS and #VATMESS when talking about this on social media. Thank you !

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