posted: Friday, 21 November 2014
I read something this week that I was sure I'd read incorrectly. I was so sure that I put it aside and it was only after it nagged at me that I checked again and to my horror discovered it was true.
Sadly (it seems in an effort to ensure larger companies such as Google, Amazon and Apple etc pay more tax) the tax laws throughout the EU are changing and from the 1st January 2015 ANYONE ANYWHERE selling any form of digital product (which for me is my patterns and books) will have to charge VAT on those products based where the customer is based.
This means even sellers in the USA, Australia etc, or someone that only sells a couple of patterns a year, will have to rapidly make themselves familiar with the rules to remain able to sell in the EU.
There are 28 different countries in the EU and apparently over 70 different rates of VAT (and some start charging VAT after just 1 sale). Each country will want a quarterly report as to the VAT owed so that would mean me making 112 reports a year- just not something I can take on. I'd also have to get 2 proofs of address for all customers (just in case they're fibbing about not being in the EU to avoid the tax :) ) and keep a hold of that for 10 years (meaning data protection issues).
I would also have to completely redesign my website (we're not even sure it is possible).
I have wracked my brains about this and spent many hours on the internet and joining in discussions to see just what is possible and how it can be dealt with.
I personally don't want to raise my prices, or make over 100 reports every year on top of all the other work I do, but I also can't lose over 50% of my income.
So sadly at the moment we're weighing up our options and working behind the scenes to see what we can do to work within the law.
So far it seems my main options are:
This is such a crazy situation and I can't believe the HMRC hasn't made this known (they've managed to send me 5 bits of post in the past 2 months but not one of them has mentioned this law change) or considered the impact on small businesses and sole traders.
The main impact issues I can see are:
If you yourself sell digital products or you know someone who does and you think it doesn't apply to you or it's not as crazy as I've made it seem then this link explains it well.
There is a petition you can sign to try and ensure UK sellers don't have to comply if they stay under the £81,000 current VAT threshold but with just 5 weeks to go it doesn't seem like anything can be done about it.
It's just over a month until this all becomes real so I'd suggest if you live in the EU and have been considering buying a pattern from a designer do it soon before that possibility may be taken away from you.
Some more useful links:
Edited to add- I've just found out that some EU countries require you to attend in person to register for VAT- I wonder if I can fit 27 different trips in before the end of December!