What about VATMOSS and all that red tape ?
Many people think they have an £ 85K VAT free threshold.
For digital services they couldn't be more wrong. If they are selling goods abroad, they need to double check, as it won't be the same as in the UK.
Online sellers of digital download service have to pay VAT on the first pound they take, if that sale is in another EU country , even if their turnover is less than the VAT threshold in their own country.
So if people are selling digital data to EU customers outside the UK, they're supposed to register for VAT here, and pay VAT on the first pound of sales for both goods and none tangible sales. For downloaded stuff it's really a bit harsh; for example some lady selling a few knitting patterns online to other EU countries, as a low turnover side-line hobby has to register for the UK's VATMOSS scheme, and to do that they have to register for VAT too, which is all completely ridiculous. The UK government rightly want a small exemption to this for such micro sellers. Many of those just gave up because of the stupid red tape. Many others won't even start because of this.
Some other small digital sellers are refusing to supply to fellow EU countries at all, because of this using geo blocking to prevent the sale, and the EU doesn't like that at all! Internal market at all that.
But otherwise I think HMRC want to catch the people selling via EBAY and Amazon, who are operating below their VAT threshold from abroad, but having enough turnover to make it worthwhile to try to collect the cash. That too, seems somewhat unfair as everyone is entitled to sell the same stuff INSIDE their country VAT free, if their annual turnover is below the level for VAT registration in their country.
UK seller, Under VAT threshold:
Online knitting pattern for £3 sold to someone in London - No VAT payable.
Online knitting pattern sold for €4 to someone in Paris - VAT payable, UK VAT registration required, UK VATMOSS registration necessary if not VAT registered in France.
For physical items there's a distance selling threshold, before you have to register for VAT in the EU country where the customer is. Usually below the VAT threshold. Otherwise you charge and pay UK VAT if you need to be registered. So goods have a distinct advantage it seems. What happens if you post data out on a CD or DVD I wonder ?
No wonder people just give up.
Catching high turnover VAT fraudsters I have no problem with at all.
Like all thinks there's a balance to be struck here, and I think they've got it slightly wrong. Very wrong in fact.
Perhaps none VAT registered sellers should be able to use Ebay and Amazon collect to pay the VAT due, on their behalf and not have to register at all.
It would be easier wouldn't it ?