Thursday, 4 December 2014

#VATMOSS #VATMESS

Are you aware of the new EU digital download VAT laws?  They take effect from 1 January 2015 and apply to anyone worldwide selling digital products to anyone in the European Union.  Value Added Tax at around 20% has to be paid on each digital download into one of those countries.  Previously these transactions were taxed at source, i.e. in the country of the provider.  Now they are to be taxed in the country of the purchaser.  Originally designed to ensure that the giants like Amazon, Google or iTunes couldn't minimise their VAT by setting up business in a state with very low rates of VAT, the new laws have implications for anyone selling online patterns or magazines, such as Fat Quarterly, and will have ripples throughout our community.  This cartoon by cartoonist Dave Walker is the best representation of the options that micro businesses have for dealing with this situation.


At the moment there is a lot of confusion out there about how this will affect micro businesses.  Until now our turnovers have been too low for us to have had to register for VAT (the UK threshold is around £80,000 although it is much lower at around  €10,000 in many EU countries) but there will be no threshold for cross-border transactions into the EU so we will be liable for VAT on any digital sale to any EU country.  We can still take advantage of the UK's threshold however as sales into the UK from the UK are not cross-border.

I am no expert in this area but you can find out more information within this Facebook group which in turn leads you to all sorts of blogposts, webinars, twitter chats, EU documents and HMRC announcements which sometimes clarify, sometimes muddify.   Many micro businesses will decide to cease trading as a result of these changes, at least in the short term.  Some of the bigger e-selling platforms may take on the responsibility of dealing with VAT registration, invoicing, record keeping and payment obligations but that will come at a cost and prices will have to rise.
The sad news is that one 1 January 2015, Fat Quarterly will stop trading.  The good news is that we intend to resume trading as soon as all clarifications about the implementation of this law have been provided by HMRC and as soon as we can change and adapt all our systems to deal with all the new obligations.  But we will be back!

12 comments:

  1. The EU is a monster. Originally designed to make trading easier they have become so wrapped up in their rule making and milking us with their taxes that they now prohibit people from making money. Ugh.

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    1. Rosemary B here:
      This is just like the US. Punish the workers.

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  2. It seems that bureaucratic idiocy thrives everywhere. It makes you want to just smash your head into a wall over and over again. Did these people not raise questions as to the possible impact of their new red tape? Obviously not. Well, we shall all be looking for the rise of the Fat Quarterly when less narrow minded bureaucratic folks realize vat mess they have created! Magistra13 at yahoo dot com
    Beth

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  3. I hope that a solution is found soon - one that allows micro business to carry on as normal but ensures that big businesses pay the taxes they ought to be paying...

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  4. I know if you order from Syko on Etsy then a 24% sales tax is automatically added once you check out if you live in the EU. Hope you find an answer soon, or draw the curtains shut!

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  5. I am so so confused by the conflicting info. Hoping beyond hope that Craftsy and/or Etsy come out with something helpful soon. Is it possible to sell FQ through a valid third party should one make itself known?

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  6. I live in the US and have followed Fat Quarterly for a while now. I didn't even know what VAT was and why you weren't producing upcoming publications. Thank you for posting this, I look forward to a future post when you are up and running again. :)

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  7. I'm not sure I understand but I know this sucks for everyone who loves Fat Quarterly and those who submit their work for publication.

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  8. What a dog's dinner of a ruling this is turning out to be! Surely common sense has to prevail and hopefully sooner rather than later? Hope the enforced lay off of Fat Quarterly is brief.

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  9. This sucks on SO many levels to all who produce patterns, magazines etc for all crafters.

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  10. This is so shit and makes me so angry! It doesn't really affect me that much but I am so sorry for you guys after all your hard work building your business up! I really hope you can find a way to continue soon xx

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  11. Let's hope a work around can be found soon - what a pile of crap :(

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Comment away peeps :-)