Do you sell your books directly to readers through your website? Or sell digital products or courses? Well, I have some bad news for you.
From 1st January 2015, there are going to be some changes to VAT regulations on digital products. Currently, VAT is charged based on the location of the seller. That means if you run a small business from the UK, you only have to worry about UK VAT laws. If you don’t earn over £82k, you don’t have to worry about VAT at all. But that’s all going to change.
What is changing?
The new legislation changes the ‘place of supply’ of digital products (what the HMRC believes is a ‘digital product’ is still up in the air, but it definitely includes ebooks). From 1st January 2015, this changes to where the consumer is based. This means that the VAT applied will be determined by which country the customer is based in.
So even if you sell a single £4.99 ebook to someone in Europe directly (i.e. not through a third-party seller like Amazon), you’ll have to be VAT-registered, pay VAT, keep consumer records for ten years, and basically go through a nightmare of admin.
Note, if you sell a service, this doesn’t apply. So fellow editors and proofreaders, you need not worry about VAT (other than the usual UK regulations) if your business is focussed solely on providing editorial services.
Why is this happening?
A question I’ve been asking myself daily since I found out about this last week, accompanied by pulling out handfuls of my own hair.
This is actually an attempt to stop big companies (like Amazon) avoiding tax by routing their sales through low-VAT countries. Ironically, it means tens of thousands of small business owners and independent authors will not be able to afford to sell their digital books and products directly, essentially giving them little choice but to put their sales into the hands of big companies (like Amazon).
What can indie authors do?
You can register for VAT in every European country (the HMRC’s VAT MOSS – Mini One Stop Shop – service is designed to make this process ‘simpler’ … ha) and make sure you’re jumping through all the hoops in order to sell your digital products directly to your readers (like collecting two or three pieces of evidence of your customer’s place of purchase and keeping this information for ten years). Or you can sell through third-party companies who will take care of the VAT responsibilities for you.
Read more about what Amazon is doing for self-publishing authors here.
Sadly, many small business owners who offer digital courses on writing and self-publishing are pulling their products. In fact, this has scuppered my plans for next year, too. (Though I am determined to find a solution … though I may wait until the dust has settled a little.)
More information
This post really just skims the surface of the issue. If you’d like to find out more, I recommend reading the following articles:
The horrible implications of the EU VAT “Place of Supply” change – Rachel Andrew
How small companies and freelancers can deal with the VATMOSS EU VAT changes – Rachel Andrew
Upcoming vat changes – what they mean for you – Dr Deadstar’s Guide to Destroying the World (Good info for indie authors)
Do these shenanigans anger you? Sign the national petition against the new VAT regulations here: Uphold the VAT Exemption Threshold for businesses supplying digital products.
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