Hannah Kate

poet, short story writer and editor based in Manchester

UK small press publishers – the new VAT legislation DOES apply to you…

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:

http://rachelandrew.co.uk/archives/2014/10/13/the-horrible-implications-of-the-eu-vat-place-of-supply-change/

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

http://www.digitalartsonline.co.uk/news/creative-business/vat-moss-facts-for-creative-professionals/

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.

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6 Comments

  1. This is both alarming and distressing. A project I have put a lot of time and effort into over the past 5 years looks like it will have to cease because of this.

    What I do not understand is I thought trading within the EU by one EU member to another is based on a single trade system where anyone in the EU can trade freely between its members.

    What has happened to that system?

    CG

    • One of the most alarming things for me has been the lack of communication. The European Commission produced a feasibility report that stated all countries has taken the correct steps to inform people affected by the new law. I don’t know about you, but I wasn’t informed. And no one I know was either.

      I’m sorry this might spell the end of your project. I’m worried it’s going to have a similar effect on some of our projects, and countless others around the country. This is simply an attack on digital entrepreneurship, which will surely have a knock-on effect on the UK’s economy.

  2. I am in a very similar boat. Just like you I’m a member of the FSB, while I’ve also contacted my MP, MEPs and a whole lot more. They all make sympathetic noises but I don’t sense any genuine effort to help us. They all have well paid jobs, with holidays, pensions and sick leave so this doesn’t affect them directly.

    I’ve looked at excluding sales from the EU, which doesn’t seem to be a practical option but frankly I don’t want to go down the route of Amazon or Apple etc because I’ll effectively lose all real control over the way my books are marketed and distributed. On a broader point I also like to know how many sales I have actually made rather than relying on some big company to be honest.

    The only workaround option I can think of is to enable some level of manual intervention for authorisation before books are downloaded to EU customers, since this would no longer be classified as an e-service judging by the guidance I saw from HMRC on Twitter. The problem is finding a delivery service that will enable this functionality. Failing that I’ll either have to build it myself somehow or close my business, which would be really annoying after having spent the last 3 years on my latest project that has yet to be released.

    Something I find really annoying is that the French tax offices are actively advising sellers that they do not need to register for VAT or comply with all this nonsense as long as they remain under the French VAT threshold, which I believe is €90,000 on services. Meanwhile our own government seems determined to make this as complicated and expensive as possible for UK sellers.

    Feel free to contact me via the email used for this comment if you think we can compare notes and find a solution. I spoke to a software developer last night who curiously thinks they are not affected and yet he is using the same delivery service as I do.

    • Hi Charles,

      I share all your frustrations. We’re in the middle of sorting out a big mess with Amazon payments at the moment, and the idea that this would be the only possible avenue for sales for us fills me with dread.

      We’ve also considered the ‘manual intervention’ workaround, but it seems that HMRC can’t decide whether that would be allowed or not. Also, given that the EU want to roll this legislation out to all goods shortly, it might only be a short-term solution.

      I’ve been looking through blog posts and tweets from entrepreneurs in other countries and it does seem that we’re all in the same boat. It doesn’t look like German or Dutch entrepreneurs knew about this legislation in advance either – though if anyone knows differently, I’d be happy to hear it! I found a newspaper article in Polish dating from May, but otherwise nothing public from anywhere in the EU. Given that the feasibility report for this legislation found that it had been correctly communicated to all those affected, I question the grounds on which the law was passed.

  3. Right across the EU there is a VAT threshold on distance selling over the internet, which can vary from €35,000 right up to €100,000. In the UK it’s £70,000. http://www.vatlive.com/eu-vat-rules/distance-selling-eu-vat-thresholds/

    Why are digital downloads being singled out with a zero threshold???? This stupid, stupid legislation must be stopped.

  4. That is ein pice of shite.
    When a guy buys CD from me I pay tax in my country because I have income in my country, not in his country, the shipping destination is of no matter, the same should apply to the digital downloads the file is shipped from the place you sell it to the customer adress, you do not it sell it directly where the customer lives, you sell it at the only place you live and the items are shipped to buyers destination, you do not go to buyers doors and sell your product there.
    Or it’s like paying taxes in foreign countries because tourists bought souvenirs from you and went back to their country with them.

    Let’s say I buy CDs from japanese store and order them to be shipped to my location, on what illogical basis should they pay tax in my country?

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