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Posts Tagged ‘#VATMOSS’

I wrote on the 11th December about the effects of the new VAT rulings coming into force on the 1st January  and since then I’ve been trying to find a workaround that will allow me to continue to sell music online.

Here’s what I’ve learned.

First of all, Bandcamp have now put together a strategy. They will collate evidence and collect VAT owed for each country, and all the artist has to do is submit a quarterly VAT return to HMRC’s VAT MOSS system.

Kudos to them for trying to do something to help. Undoubtedly this will certainly help the more established artists.

Now, let’s talk about the less well established artists.

I tried to register for VAT MOSS, but I am not able to without registering first as a business. But I am not a business, and the tax man does not really want me to be a business. And here is why. I spent a significant amount of money making music. I do not and have not ever earned that money back. I have never made a profit. This, from the HMRCs perspective, makes me a “hobbyist”.

My main reasons for selling music digitally are as follows:

1) It helps me to be heard in a wider sphere and helps increase my fan base.

2) It helps make a small amount of money to offset the thousands of pounds I have spent on equipment, training, consumables, getting CDs printed, mastering, etc.

But, here’s the crucial thing. My zero profit comes nowhere near the £2,499 a year threshold to even sign up to complete a tax return. That’s right. I can’t even sign up for Self Assessment. I did try, repeatedly, and every time I entered my income (read: “loss”), HMRC’s own website told me I was not eligible.

So, even with Bandcamp’s help, because I can’t actually sign up for VAT MOSS, I would be breaking the law by continuing to try to sell music through them, because there is no way to disable VAT collection on any sales except those within the UK. Bandcamp would still charge the VAT, but there would be no corresponding returns to HMRC because I can’t register.

Stuck between a rock and a hard place.

The Musician’s Union website advice consists of “speak to your accountant”. What if we don’t have an accountant? What if we’re still at the slow hard slog of our careers, where we’re honing our songwriting craft and still learning the business? This can take years, decades even, for artists who are trying to hold down jobs to pay the bills whilst also trying to fulfil the dream of making music. One of our key tools to reach potential listeners further afield is the internet. Yes, we could all make our music available for free, but that’s a step backwards, especially given how expensive it is to make music in the first place.

I am heartbroken. It’s taken me over a decade to get here. A decade of trying, failing, learning, trying again, to make these tiny steps into the music industry. I finally had a Bandcamp profile I was proud of, with songs that were starting to sound, and feel, like they’d been put together by someone more than a rank amateur. I was starting to see increased sales, to people who don’t know me in real life. I’ve been starting to get good reviews, and starting to get noticed. I’ve even had some plays on BBC Introducing. Hell, Tom Robinson shared my last blog post on his Twitter. Fame at last!

Tom Robinson Tweet

It’s taken me so long to get here and now I face a huge setback. I can’t even begin to describe how saddened I am by this whole thing. And also how angry I am at the catastrophically slow response of people to the issues raised. There are roughly 64 million people in the UK, most of whom benefit from being able to buy and sell digitally, but at the time of writing this, still only 10,311 people have signed the petition to try to get this law re-examined. More of a public stink was made about the right to watch someone sit on someone else’s face in a porn movie. Don’t get me wrong, I don’t believe in censorship, but in the grand scheme of things, this EU ruling is much more damaging to us as a nation than being told off for a scat fetish. I can’t help but feel that one of the main reasons this was kept quiet for so long by the powers that be was to deny us the chance to fight it. A combination of leaving it too late, plus the natural apathy of the public would keep us all in our places. And that makes me furious.

So what now?

Well, for now, my music will no longer be available to purchase digitally through Bandcamp. At all. Anyone wanting to purchase music from me will need to contact me through my website, and arrangements will be made from that point. I plan to restrict online sales of digital downloads until further news/arrangements are in place that cover artists in my position, so that we don’t have to choose “breaking the law” as our only option through which to make international digital sales.

Copyright Dave Walker

Copyright Dave Walker

The above cartoon is by Dave Walker and is used with kind permission. There is a larger version of the cartoon (as well as how VAT MOSS will impact on Dave’s work) at http://davewalker.cc/vatmoss-cartoon/

Meanwhile, I plan to focus on writing, writing, writing some more. My journey as a writer has not ended. I’m only getting better and if I stop now I’ll never know how far I could have gone. I still want to place music in film and television and that means I need to keep honing my craft. I’m nowhere near good enough yet and so the challenge continues. If I’m lucky enough to place something, that will certainly bump my income so that HMRC will sit up and take notice…

I’m sorry to end the year on a low note. I leave you with this plea. It doesn’t matter what you think of my music. It doesn’t matter whether or not you ever would have bought it, or indeed any music, or any creative product digitally online. Please, please think of the artists and the consumers. Especially the small ones, the starting outs, the slow plodders, the ones who think of this as their career even if HMRC treat it as a hobby. Think of the stay at home mums selling knitting patterns. Think of the small cottage industries (many, coincidentally run by women). Think of the little people who can’t afford an accountant, who are being shut down by this law. Think of us all, and fight for us.

With heartfelt thanks, and wishes of a wonderful 2015 for you all.

How You Can Help:

http://euvataction.org/take-action-now/

Further Reading

http://onemanbandaccounting.co.uk/eu-vat-changes-2015/

http://www.huffingtonpost.co.uk/soozi-baggs/new-eu-vat-regs-seriously_1_b_6177222.html

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

Cartoon used is from Dave Walker  – he’s awesome, check him out!

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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.

£0.89

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.

PETITION – PLEASE SIGN AND SHARE

Further reading

http://onemanbandaccounting.co.uk/eu-vat-changes-2015/

http://www.huffingtonpost.co.uk/soozi-baggs/new-eu-vat-regs-seriously_1_b_6177222.html

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

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