New VAT rules for digital services

Further to a previous thread, has anyone received any definitive advice , direct from HMRC (not your accountant mate from the pub aunt sally team), stating that domain names are a "digital service" for the purposes of that legislation?

Having sought advice from my accountant and having read through the original legislation on the EU website last year, I was of the firm opinion that domain names are certainly not covered & that the OP of the previous thread had received bad (& potentially costly) advice.

However, I note that ICB plc are charging different VAT rates to EU customers for registrations & renewals.

I think they are wrong. Are any other registries or registrars billing in that way?


Further reading...
https://www.gov.uk/government/uploa.../415931/VAT_MOSS_Flow_chart_FSB_edit_V1_0.pdf
https://www.gov.uk/government/publi...o-private-consumers#defining-digital-services
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:284:0001:0009:EN:PDF

 

It took 3 weeks waiting but HMRC confirmed to me that my domain resales would not be classed as a digital service.

There's more to it than just the product though, it's to do with how the sale is conducted - if it's a totally automated, hands-off process then it is classed as a digital service, so most registrars would be included in the legislation.

Grant

 

Here's the 123reg page on it, so I assume all that group and most registrars are covered by the changes :

https://www.123-reg.co.uk/support/answers/Account-Admin-and-Billing/vat-123-reg-invoices-3072/

 

Thanks Grant. They would certainly have to apply those rates to things like a 'website builder' service, as that is automated & delivered online, but domains? I'm not so sure.

A registration is essentially a lease. Just because it is bought online does not mean it is a 'digital product' - even the HMRC guidance is unequivocal about that.

 

The legislation was introduced to stop the likes of Amazon setting up in a low-VAT EU country & selling downloads across EU borders to the detriment of other member states' tax authorities. Similarly, TV companies can broadcast from space but do their billing from a tax haven.

I suspect every EU country will have it's own interpretation & implementation. I also suspect some companies will just apply the rules across-the-board to make life easy (for them).

 

Try giving HMRC a call, they were pretty clueless about what was/wasn't included when I rang so you may well get a totally different answer than I got.

Grant

 

HMRC were a little clueless with me too but they tried explaining that anything which is primarily automated would be included and lots of dibble which I don't remember.

My accountant (at the time I asked) was of the opinion sedo mls (auto sale and transfer) would 100% be a digital service and included, he was 90% sure buy it now domains where only an email is entered to perform a transfer would be included, but domains where research is done to find a buyer or negotiations occur, wouldn't be subject.

He kind of suggested until the rules are applied and tested, it would be difficult to give exact answers. His advice were research and negotiate and be well.

My advice, ignore us all an speak to hmrc and an accountant direct

 

I see that Sedo changed the VAT on auction/BIN commissions to reflect the new rules, which seems logical to me.

I'm not convinced that domains are, in themselves, an "electronic service"


Btw, the dedicated HMRC email is... [email protected]

Another reason to


.

 

The HMRC have since confirmed my accountants thinking since my previous thread, ie. if it's a "Buy Now" scenario then they will qualify for VAT, but if it's a negotiated sale then most likely not. I think that's about as clear as it gets from the HMRC, and will only become "crystal" once tested in the courts.