On the 1 Jan 2015 new EU VAT rules come into force that require anyone in the world selling “digital services” to consumers in the EU to charge VAT on the sale regardless of any national VAT exemption status for low turnover businesses.
Needless to say, the requirement to register for, and charge VAT at the correct country rate, and to regularly complete VAT statements, along with the requirement to retain non-conflicting evidence to confirm a customer’s location for 10 years, are a substantial burden to micro-businesses like ours.
If you’re not aware of this requirement, you’re not alone. We only learned of this accidentally at the start of December 2014 by chancing on an article on social media. It would seem that no-one thought to inform non-VAT registered businesses that they may become liable to be VAT registered.
Official information on whether businesses fall under the umbrella of supplying “digital services” is ambiguous, and we’re still awaiting a further reply from our queries with HMRC as to whether our modus-operandi would be excluded or not.
Currently we have to play safe and assume that we’re not excluded, so we’re investigating alternative payment providers to PayPal (who do not handle VAT). As you might expect, these services have their own fees, so unfortunately the price will increase slightly, and of course anyone in the EU will now be charged VAT at their applicable country rate.
If the HMRC guidelines change, or we receive specific feedback in response to our enquiry with HMRC that mean we’ll be excluded, we’ll continue with our existing pricing and PayPal.
Links to articles & web sites dedicated to this issue:
Generally search for EUVAT and VATMOSS for more information.
Happy New Year
Julie & David Lowndes