Any VAT experts here familiar with digital download rules?

[mellowman]

I'm a little confused...let me explain...

I want to sell digital sheet music, downloaded through our website here in the UK.

Our main supplier mainly produces printed sheet music, but also books and magazines, and is VAT registered - we are not VAT registered. They would supply us the files in digital format, and we would do the final tweaking/converting before uploading them to our online store.

I know we have to charge VAT for EU sales, but as we're not registered is that still the case, and does our supplier have to collect the VAT as a business to business transaction (even though we're not registered)?

I know printed sheet music is zero-rated/exempt, but what about digital sheet music?

Any pointers appreciated - or if anyone can redirect me to a more suitable forum/website.

Many thanks

[akirk]

If you are not VAT registered you don't charge vat for anything...
If you are (your supplier) then you always charge it according to the rules...

So at a simple level, a £10 item from them sold by you at £20
would be £10 + £2 VAT on their invoice to you, and you sell it at £20 - no VAT
you can't reclaim the VAT, so it is a cost either you absorb, or which you add onto the final bill... by making your price higher

[Eric Mc]

You may need to read this -

https://www.gov.uk/register-and-use-the-vat-mini-o...

[mellowman]

Thanks for the feedback.

We definitely do not want to register if we don't have to, and are quite happy to absorb the increase in our buy-in price if it means we can avoid the dreaded VAT administration whilst we see how things go. We think it'll take some time to grow to that level as it's a very niche market at present.

Does our supplier have to account for the VAT if they're supplying us as digital files - I'm guessing so? In printed form they'd be zero-rated, but digital goods are classed as services under the new rules and the standard rate applies.

If we don't charge VAT for anything our prices are the same regardless of where they are bought and I'm assuming, we have no need to account for any EU/Rest of World differential pricing because of this?

The only outward effect is we absorb the VAT in our wholesale transaction and our supplier has to account for it but can reclaim?

[Eric Mc]

Did you read the MOSS link?

Some small UK businesses that have no need to register for UK VAT may find that they have to register under the MOSS system in order to account for VAT in other EU countries.

[maffski]

If you're delivering the digital 'products' from your own ecommerce shop it's almost certain you need to be compliant - this means using the MOSS, the alternative method is simply to become VAT registered in every EU country you receive an order from...

You can avoid the requirement by

1) Not selling to customers outside the UK
2) Using a third party sales platform that will handle the VAT requirements for you
3) Products that require 'hands-on' customisation or processes are exempt from the VAT requirement - the simplest example being if you deliver the order by manually attaching a PDF to an email this does not count as a 'digital product' and UK VAT rules apply

[mellowman]

Eric Mc said:

Did you read the MOSS link?

Yes, and other HMRC pages and flow charts. They do imply registration under the MOSS scheme.

There's a good discussion of it at https://rachelandrew.co.uk/archives/2014/11/25/how...

Thanks for the further pointers. I'm tempted to use the workarounds suggested for non-UK EU sales.

Personally, I think it's a terrible ruling, but I can understand something needs to be done with burgeoning digital sales.

[Eric Mc]

It is a right bugger's muddle - and total overkill for small businesses. As ever, the large abusers of the VAT system have ruined it for the smaller, genuine, operators.