This one new rule could force so many of us out of the exciting new world of selling our creativity online.
I have run several companies over the years and almost always I have registered for VAT (value added tax), the advantages being clear to me, and ultimately. the turnover of these companies forcing me to do so in most cases.
But new rules that come into effect on January 1st will impact ALL people who sell, or plan to sell, their stuff digitally over the internet to people to people (not businesses – B2B).
Right now these new rules only apply to sales in Europe (and as far as I can tell, not sales to the UK).
I will now be obligated to start a MOSS VAT scheme (Mini One Stop Shop) toi handle the sales of my online assets, such as the Hollywood Pocketbook that is also an eBook. Or my Gone Fishing Masterclass.
There is a flow chart here to explain the MOSS VAT process – https://whitehall-admin.production.alphagov.co.uk/government/uploads/system/uploads/attachment_data/file/390300/VAT_MOSS_Flow_chart.pdf
In practical terms, if you are selling stuff online (digital delivery and not physical delivery), then it’s almost certain that at some point you will sell to a European buyer and then you will be forced to register for a MOSS VAT scheme.
There is loads of info on the government website here… https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers
I am no accountant but I have run my own companies for years, and registering for VAT and doing quarterly accounts is no major deal. Really it’s not that bad
And there are some real benefits as you are able to reclaim VAT on many purchases.
But I do get why many people really don’t want this hassle, especially if they have very little turnover. It’s just a hassle.
What I can see happening is people doing one of a few things…
- Shutting up shop and just not selling their stuff.
- Selling through an aggregator or distributor who handles VAT for them
- Dodging it and hoping no-one notices (not a good idea)
OK so here are a few things that WILL attract VAT if sold to buyers in Europe from Jan 1st. If you are selling this stuff, this WILL impact you.
- eBooks / PDF files
- Digital downloads of your film
- Streaming versions of your films
- Screenplays (digital download version, NOT the Screenplay rights)
- Advertising space on websites
- Software / Apps
Now here’s what’s interesting.
If you sell a DVD and offer a free download, most likely that will not force you to register for VAT. Though you will need to send a DVD of course. The same is true of books, and anything supplied on a physical media. This is not confirmed but logically it makes sense to me. Of course the VAT office may see it differently.
What about Crowdfunding?
Here is where it really gets murky. There are many ways to interpret crowdfunding money that is received.
Even the tax office seems unclear as how to deal with income from crowdfunders.
But from my perspective, it’s sales income. You are offering goods or services (download of the film / ticket to the premiere) in return for money. It’s pretty clear cut though I suspect many accountants try and spin it.
If that is the case, and if it’s a ‘digitally delivered’ perk that has been bought via crowdfunding campaign, all European sales will attract VAT and you must register for VAT.
Again, I am no accountant but I would strongly recommend speaking to your accountant or the tax office if you think your business will be impacted.
And don’t make the mistake of thinking you are too small to be noticed. You may be right, but you do not want the full weight of the tax office bearing down on you.
As filmmakers we bend rules all the time, even break them sometimes. In so many instances I have asked for forgiveness and not permission, and it has worked. But when it comes to accountancy and tax, I play everything by the book and with full professional advice. You should too.
Onwards and upwards!