VAT Changes for 1st Jan 2015

[splashweb]

Haven't seen any discussion on this, but the new rules for VAT starting 1st January 2015 will effect some of us.

ANY B2C sales of Digital Services, which includes domains and online advertising, will have to be declared for VAT purposes, and charged for to include VAT at the rate relevant to the buyers market. This will then force anyone making these sales to register for VAT in the UK and to make quarterly VAT returns on these sales, irrelevant of whether your turnover is under the UK threshold.

If you only sell B2B then there's no change, but, by my interpretation, transferring a domain to a private individual in another EU market will count as a B2C sale. Something I shall no longer offer.

It all sounds like a small business nightmare, designed to level the playing field across Europe, but will embroil sole traders and a like in a significant accounting burden. A simple solution, which is unlikely to happen, would be to have a uniform VAT threshold across Europe. However, the UK threshold is higher than most, so would likely come down, whereas in the Netherlands I gather there is no threshold, VAT is due on all sales.

Read the details at this page on the gov.uk site.

Perhaps someone here has more insight into this?

 

[martin-s]

I believe I'm right in thinking that B2B supplies carry on as normal, particularly in relation to Reverse Charge mechanism where a customer has supplied a valid EU VAT number.

We have sold a few products to EU consumers in the past, but like you, won't be any longer. If you're in the EU, you'll need an EU VAT number to work with us.

 

[splashweb]

If you're in the EU, you'll need an EU VAT number to work with us.

What's your thinking with this statement? as it excludes trading with non-VAT registered businesses elsewhere in the EU; or do Sole Traders not exist elsewhere?

 

[invincible]

Haven't seen any discussion on this, but the new rules for VAT starting 1st January 2015 will effect some of us.

ANY B2C sales of Digital Services, which includes domains and online advertising, will have to be declared for VAT purposes, and charged for to include VAT at the rate relevant to the buyers market. This will then force anyone making these sales to register for VAT in the UK and to make quarterly VAT returns on these sales, irrelevant of whether your turnover is under the UK threshold.

If you only sell B2B then there's no change, but, by my interpretation, transferring a domain to a private individual in another EU market will count as a B2C sale. Something I shall no longer offer.

It all sounds like a small business nightmare, designed to level the playing field across Europe, but will embroil sole traders and a like in a significant accounting burden. A simple solution, which is unlikely to happen, would be to have a uniform VAT threshold across Europe. However, the UK threshold is higher than most, so would likely come down, whereas in the Netherlands I gather there is no threshold, VAT is due on all sales.

Read the details at this page on the gov.uk site.

Perhaps someone here has more insight into this?

Read through it. I can't see how this doesn't affect anyone who's business is located in the EU, including those located in the UK that perform B2C with other UK customers. After all the UK is an EU state. On that basis anyone trading in domain names from the UK will need to become VAT registered. In the respect of B2B, perhaps where one domain business sells a domain name to another domain name business, if both businesses are VAT registered, the purchasing business will be able to claim back the VAT they paid the selling business.

Looks to me like everyone trading in domain names from the EU will need to become VAT registered.


(from iPad - K)

 

[splashweb]

Read through it.

I have, in some detail, but I'm no tax expert, hence raising the issue here.

Looks to me like everyone trading in domain names from the EU will need to become VAT registered.

I don't see it this way, as these new rules only effect B2C sales.

 

[invincible]

I have, in some detail, but I'm no tax expert, hence raising the issue here.

Sorry, I meant "I'd read through it". Wasn't telling you to read through it.

I don't see it this way, as these new rules only effect B2C sales.

How does one reliably define a B2C sale vs a B2B?


(from iPad - K)

 

[splashweb]

Sorry, I meant "I'd read through it". Wasn't telling you to read through it.

No worries.

How does one reliably define a B2C sale vs a B2B?

By adding a term for buyers to confirm whether the purchase is for business or personal use and excluding/including the "Non-UK Individual" registrant type when doing transfers (Self Managed & Accredited TAGS) - depending upon which types of sale you'll accept.

 

[atlas]

It's not clear to me that domains are even caught in this. From:

https://www.gov.uk/government/publi...he-vat-mini-one-stop-shop-additional-guidance

This covers e-services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention.

Then from:

http://www.accountingweb.co.uk/article/vat-digital-services-human-intervention/569688

The boundary between automated digitally delivered services and human intervention as part of an e-service is thus quite hazy, and it will be up to the individual business to assess which side of the line they fall.

A micro business that sells a few knitting patterns, photos or e-books online may decide it is not be caught by the e-services rules, as long as any overseas sales require human approval by the seller and the products are dispatched by an individually written email to the customer. Where an online shop is currently set-up to provide automatic delivery to all customers, perhaps a tweak to the website coding to pause the process for overseas customers, to allow a human to complete the next step, may take the service outside the e-services rules.

So perhaps there is a de-minimis after all. If the micro business has a low level of overseas sales such that human intervention can easily be applied to each of those sales, those sales will be outside the scope of the e-services rules. If the volume of overseas sales grows to such a level that automation is required, then the business will have to register for UK-VAT and use VAT-MOSS for the EU-VAT.

It's pretty clear that a domain negotiation, sale, and transfer involves a fair amount of human intervention.

 

[splashweb]

It's not clear to me that domains are even caught in this.

My accountant specifically confirmed they are, but the more I read around the more it seems that another accountant may not. So, yes, plenty of room for ambiguity as things stand.

It's pretty clear that a domain negotiation, sale, and transfer involves a fair amount of human intervention.

I hadn't appreciated this aspect fully; hopefully "human intervention" will save the day, even when sales are via a "Buy Now" button.

Hopefully there'll be some clarification as things proceed next year.

 

[anthony]

It's not clear to me that domains are even caught in this. From:

https://www.gov.uk/government/publi...he-vat-mini-one-stop-shop-additional-guidance



Then from:

http://www.accountingweb.co.uk/article/vat-digital-services-human-intervention/569688



It's pretty clear that a domain negotiation, sale, and transfer involves a fair amount of human intervention.

It doesn't matter about all that faff regarding human intervention, it is the domain name that is the digital 'product', and which will be the 'item' sold in a contract.

Of more interest is the tacit acknowledgement that a domain name is an asset that attracts VAT, and whether finally we have something to support that domain names are assets, not simply the '...entry in a database...' shit that Nominet hangs it hat on!

 

[atlas]

It doesn't matter about all that faff regarding human intervention, it is the domain name that is the digital 'product', and which will be the 'item' sold in a contract.

It does though. For instance, if you go through this:

https://www.gov.uk/government/publi...he-vat-mini-one-stop-shop-additional-guidance

you'll see that a pdf emailed automatically is covered by the new rules, but a pdf emailed manually isn't.

 

[martin-s]

What's your thinking with this statement? as it excludes trading with non-VAT registered businesses elsewhere in the EU; or do Sole Traders not exist elsewhere?

It's an appropriate stance for my business, but won't suit everyone Domain sales don't matter much to me - I buy and develop a lot more than I sell. My last three years domain sales don't even quite total £15k.

 

[splashweb]

It's an appropriate stance for my business, but won't suit everyone Domain sales don't matter much to me - I buy and develop a lot more than I sell. My last three years domain sales don't even quite total £15k.

Fair enough, thanks for clarifying.

 

[splashweb]

I got some clarification from my accountant on the issue of "human intervention", not definitive perhaps, but a useful response:

"Where there is negotiation I definitely agree this would not be the provision of an e-service.

As for the sale of domain names without negotiation it would depend on the level of ‘human intervention’ If you are saying that when a domain name is purchased from you, you physically have to perform tasks (completing a registration form, filing of paperwork with authorities, communicating with third parties, etc…) before the domain can be registered to your customer I think you could argue that this is not an e-service. If on the other hand you simply click a few buttons, links, log on to a website to tick a box etc… then I would still suggest this is an e-service.

On this point, if you feel you can justify to HMRC that there is more than no/minimal human intervention should they enquire, you might want to consider that your services do not fall under the new VAT MOSS scheme rules. If this is the decision you make I would recommend you include on you sales invoices something that suggests the sale included some sort of manual service provided by personally by yourself (e.g. Transfer of domain name including negotiation with previous owner / Registration of the domain name xyz.com as per your instructions).

Sorry I cannot provide a more definite answer but as is often the case with HMRC they leave the rules open to interpretation should they change their own stance at some point in the future."

What are your own accountants saying about this?