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As the EU’s controversial new VAT rules creep ever closer, online platforms which will be handling EU VAT payments on behalf of their sellers have begun issuing guidance on how the new rules will work in practice. The latest is perhaps the largest of all the platforms involved – Apple.
Sales through Apple’s App Store account for over half of all paid app downloads worldwide, and an even higher percentage in the EU. Selling through a “platform” means small businesses do not have to deal with the EU’s new VAT reporting requirements, as the transaction is considered business-to-business (between the app developer and the owner of the platform; Apple, in this case), while the eventual sale of the app to the end user – for which EU VAT reporting is required – is dealt with by the owner of the platform.
Yesterday Apple emailed all their developers to inform them that, although the income they make from app sales will not change, the new rules necessitate that VAT is applied in the country of sale. This means that end users will see different prices depending on which member state they make their purchase from.
On January 1 2015, value-added tax (VAT) rates for apps will change for all territories in the European Union. VAT will be based on the customer’s country of residence instead of being the same across all EU territories.
Note that prices for apps on the App Store include VAT, while developer’s proceeds are calculated after VAT is deducted.
The “platform rules” are one way micro-businesses can avoid HMRC’s reporting requirements (and Mini One-Stop Shop registration), however selling through a platform usually means giving a slice of your profits to the owner. In Apple’s case, 30% of the sale price. You can find out if your are affected by the new EU VAT rules here.
HMRC are consulting with business groups and campaigners over ways to improve the EU VAT rules, and have already dropped the requirement that all businesses using the scheme must register for UK VAT – businesses will now only have to register if they exceed the existing VAT registration threshold. What form the rules will take when they come into law on 1st January 2015 remains to be seen.
Over the last few months of 2017 and the whole of January, client managers are busy reminding people of upcoming deadlines and things they’ll need to do to make it easy for them to keep on top of their Self Assessments.