As you might know, I run a fiction micropress publishing paperbacks and eBooks. We sell via the usual platforms, but also through direct sales on our website. I know a number of people I am friends with on social media also do the same. This post is directed specifically at UK small presses (and non-KDP self-published writers) who might not be familiar with the upcoming changes to EU VAT regulations. I see from Twitter that many UK small presses and sole traders are under the assumption that the new law will not impact them – I hate to be the bringer of bad news… but it will. And you need to know about it now.
I’m writing this from the perspective of a UK small business. Due to our high VAT threshold, there are some specifics that might not be as concerning to companies based elsewhere in the EU. But all EU businesses are affected by this legislation. And our non-EU colleagues might also want to be aware that the new regulations mean that if a non-EU business/entrepreneur sells an eBook to an EU customer, they will also have to register for EU VAT.
Here’s our situation – if the same applies to you, then this post is for your information. If it doesn’t apply to you, or you already know all this, then as you were:
We are a small press with a turnover of less than £81,000 so are not currently registered for VAT in the UK. We sell eBooks (which are subject to VAT, while paperbacks are currently exempt in the UK). As VAT is currently collected at the ‘place of seller’ (i.e. where we’re based), and we’re exempt, we’ve never had to deal with collecting or paying VAT. We sell eBooks directly to customers, using a payment processor (i.e. PayPal).
We were not told about any impending changes to VAT legislation, despite the fact that we submit our tax returns to HMRC, we have an accountant and we are a member of the Federation of Small Businesses. I found about this via Twitter. HMRC have since admitted that they only notified companies that were already registered for VAT. You may have ignored the #VATMOSS hashtag over the past couple of weeks because you assumed your press was exempt from paying VAT. It’s probably time to start joining in the conversation now.
HMRC have also admitted that they thought we all sold through Amazon/Apple/Google, and had no idea that we might – you know – not want to give the axis of evil the lion’s share of our profits.
As of 1 January 2015, VAT on business-to-customer digital downloads (i.e. when a customer buys an eBook directly from your website) will be collected in the ‘place of supply’ (i.e. where the customer is based) and there is a zero threshold. Companies and sole traders need to be registered for VAT with any EU member states they intend to trade with, even if they only anticipate selling a £1.99 eBook to a reader in France. There are also regulations on what information you must collect to verify the location of a customer – and this is an administrative and financial nightmare/impossibility.
If you currently sell eBooks via your own website, you need to learn the implications of this legislation. It does affect you, no matter how small your turnover.
If you are registered as a sole trader, this will still affect you. Sole traders are counted as small businesses under this legislation.
It’s 3am, and I’m not a tax advisor, so I’m not going to start trying to explain the details of the legislation. Here are some links to get you started:
You should also search ‘EU VAT regulations 2015’ and check out the #VATMOSS hashtag on Twitter.
A couple of other independent creative industries have started to band together for support and lobbying power – the knitting pattern designers are proving to be quite the formidable force, and the comics creators are becoming more vocal. Those of us who run small presses or who are independent authors need to follow suit and stick together. We need to share information and support one another. I’d like this blog post to be the start of the conversation – so please add to the comments and share your concerns.
Most of us have day jobs as well as our businesses. We work ludicrous hours producing the books that we sell, on top of administration, other employment, childcare, etc. I’m sure if you’re anything like me, learning this news felt utterly overwhelming and defeating. Let’s talk to one another and see if we can’t share our knowledge and concerns.
I have already written to my MP and an MEP about this issue. Many small businesses are lobbying and putting pressure on the Treasury and HMRC. Fuck knows if it’ll do any good, but if the alternative is only selling eBooks through Amazon then I think it’s worth a shot.
In case you’re still holding on to the hope that HMRC know what they’re doing, here’s a video of someone attempting to register for the new VAT Mini-One-Stop-Shop (the one we all need to register for by January, to avoid registering in individual EU states). It’s Kafka-tastic.