Freelance (not quite) Friday – VATMOSS updates

As we approach EU-VAT-Reg-Day (Jan 1), here are some updates. A lot has happened since my first VATMOSS post (which you can read here if you need a bit of background on what this is about. If you sell digital content online, this concerns you).

I will be getting things off Gumroad, etc, before New Years, and know what a lot of fantastic individual creators,  small presses, and small businesses of different sorts will be calling curtain, and that is a horrible, backwards thing.

I’ll update a few categories here: Campaign updates; International; Third-Party Platforms; and Emailing Files.

Campaign updates:

The EU VAT Action campaign has been incredibly active, and I’m hugely grateful for the work so many people have put in.

They have a great update here. The general gist is: UK higher-ups have heard and now understand the issues, and meetings and behind-closed-doors campaigning is happening. However, a) this’ll take some time, so Jan 1 stands as implementation date, and b) being an EU-wise legislation, there are limits to what UK reps can do.

To do: Keep sending letters to your MEPs – Enterprise Nation has a great template and link to look up your MEP, especially if you’re in another EU country, as it seems likely nothing will happen if it appears that UK is the only country concerned, and it also needs to be clear this is an ongoing concern and not something we’ve forgotten about already. Also, please go sign the EU petition ASAP if you haven’t yet!

If you are a business who is having to make the horrible decision to close your doors, please submit a case study to EU VAT Action

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International:

You may notice in my initial post that I’m only addressing UK and EU sellers – at the time I hadn’t made the connection that, since the new regs are about stopping large corporations avoiding VAT on sales to the EU by incorporating in low-tax locations (eg. Luxembourg) – by making the tax payable to the country of purchase – that means sales made from anywhere to an EU country owe VAT to the country of purchase, plus have the info retention burdens, etc. That would make, say, a Canadian comicker selling comics on Gumroad who happens to have a few purchases from the EU liable for everything described here. (I’m just talking regulations here – I have no idea how this would be enforced – but as business owners, we’re all aiming to be on the right side of the law!)

There is currently a US petition online, asking the White House to negotiate with the European Commission on this, so that’s a start. Other than that, it may be absolutely-awful-but-wise to consider suspending sales for a while while. (And the third-party platforms section below may be relevant.)

Wherever you are, it would be worth contacting your tax office to find out what their response is; EU countries are setting up ‘VAT Mini One Stop Shops’ so that businesses don’t need to register in every EU state they sell in – it’s still an unworkable admin load for a huge number of microbusinesses, but will at least allow larger UK businesses to keep trading. Your country may be setting up something similar, so it would be good to know what their response is. If you do find any responses/documentation, please pass it around online for other creatives based in your neck of the woods.

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Third-Party Platforms:

Selling from one’s own site results in much more workable profit margins and greater control and audience connection. But when this all came to light, and it began to seem that would no longer be an option for most of us, one of the biggest questions was third-party platforms, and whether they would offer us a way to keep selling without registering for VAT. A good third-party platform could allow many of us to continue as-is, without a huge change.

In multiple Q & A’s, HMRC representatives indicated that third-party platforms hosting sales and downloads would be liable to look after VAT, which seemed hopeful. But due to some contradictory responses on various details early on, and not knowing whether they considered that liability as something that could be transferred via (common) T&C’s stating all tax is the seller’s responsibility, it seemed best to be cautious. That seems to have been the correct approach, as EU VAT Action’s recent update states that “At the moment we cannot find any mention in the 94 page EU explanatory notes that says the 3rd party platform is liable.”

So it’s all down to the platforms themselves, and their updates will probably come in drips and drabs as they decide what to do. Here are a few that you may want to look into (*bearing in mind I’m not endorsing any of these, and haven’t tried the latter 2. Read the T&Cs well, as always):

Etsy: Being such a large platform, and having recently added digital download sales, I was hoping Etsy might be one of the platforms to step up to the plate here, but – having released they’re statement – they’re leaving tax as seller’s responsibility, and that’s totally understandable. What’s worth mentioning is they say they’re looking into allowing sellers to limit the places their digital content will ‘ship’ to. This may need some legal investigation on whether that constitutes any form of discrimination, but if most of your readers are, say, in the US, it seems something worth looking into.

Paddle.com : I’d not heard of them before, but they’ve stated they’re acting as a reseller, passing on a percentage to you and taking on the VAT themselves, so seem very worth looking into. Per-transaction fees rather than subscription.

Fifthweek : a new platform who contacted me on LinkedIn – and who say they’ll be tackling VAT, which makes them worth looking into. They’re a subscription platform though – so not necessarily the right fit if you’re looking to sell a pdf of a finished comic, but possibly good for people whose work is in the Patreon/webcomics/ongoing mold.

More as we find them – let me know if you know of a platform who’s released a statement on this.

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Emailing files: This is a loophole that’s been going around because the regulations refer to automated downloads with minimal human intervention. Thus, it was said in Q&A’s, if someone purchases a file and then you manually email it to them, this is outside of the new regs.

Aside from this perhaps not feeling like the most professional way to deliver files to customers, I had disregarded it due to Andrew Webb, Senior VAT Policy Manager at HMRC, comments as recorded by knitwear designer Ysolda, in a talk she attended, as he very clearly clarified that this is not the case, any file sent via the internet that a customer has paid for constitutes  a digital service including files that are manually emailed“.

However, in the updated official guidelines on the gov.uk site, it addresses this in the ‘Defining Electronically Supplied’ section. Basically, a ‘Pdf document manually emailed by seller’ does not count as ‘electronically supplied’ and is not included under the new regs….but, a “Link to online content or download sent by manual email” is and does. So you can manually email files, but you’ll be limited to files that are small enough to attach to the email, which won’t work for most comickers.

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That’s all for today – as mentioned, if you have any updates on relevent platforms releasing statements, let me know! In the meantime, follow EU VAT Action for updates.

2 thoughts on “Freelance (not quite) Friday – VATMOSS updates

  1. Patrick Samphire

    Hi Sally. Thanks for this round-up. Very useful! As well as paddle.com, I’ve come across Fastspring (Fastspring, which seems to do roughly the same as Paddle. Digital Goods Store have also said they are converting to a reseller to handle the EU Vat.

    Alternatively, you can use something like Taxamo, which won’t pay your VAT for you, but will calculate rates, gather evidence and store evidence for you, which covers a large part of the admin. The other advantage of using something like Taxamo over the resellers like Paddle, Fastspring, Digital Goods Store and other is that you get to keep your UK tax exemption if you’re based in the UK and thus won’t have to add that 20% to UK prices.

  2. Fabio Virgi

    Hi Sally,

    Just to clarify, with Paddle’s checkout you’ll be able to sell directly on your website — as you say, “without a huge change”. Our 5% + $0.50 per sale covers everything from your checkout, analytics, customer support, file hosting and we’ll handle VAT for you, since we act as the reseller of your products.

    Why use Paddle? We take all of the work involved with selling your digital products away. You can set up a product and start selling on your own website in minutes. We’ll pay you your earnings monthly, with our commissions and VAT already deducted.

    And as an added bonus, we’re based in London too 🙂

    If you have any questions, please don’t hesitate to reach out! fabio@paddle.com

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