Some of you are doubtless sick of all this VAT stuff by now, but it is consuming my life at the moment so I have nothing much else to write about. Sorry.
The current view is that a small press will probably be OK, and an individual writer will definitely be OK, if they stick to selling through VAT-compliant marketplaces. We think Amazon will be deemed compliant. So far so good. We don’t have to register for VATMOSS, as long as we close any direct sales outlets and stop selling through non-compliant stores. But what if the press wishes to raise money in some other way, such as a project on Kickstarter, or via Patreon?
This is where things start to get very murky, because it isn’t clear that anyone at HMRC knew what crowdfunding and patronage were before we started telling them. They certainly don’t seem to have appreciated how important these things are becoming.
With regard to crowdfunding, there is a lot of hot air blown over the subject of whether rewards count as “sales” or not. People go through all sorts of verbal gymnastics trying to prove that rewards are an investment in the company, or a donation, or some other thing that is not taxable. None of the accounting advice I have seen has any truck with this sort of thing. (See here, for example, or Suw Charman-Anderson writing for Forbes). Kickstarter even explicitly warns users that some rewards will be subject to VAT.
However, crowdfunding platforms do not view themselves as marketplaces. Even the UK-based ones I have looked at explicitly state that they exist only as a means to help users run campaigns. They do not collect VAT for you.
Now HMRC says that it is the responsibility of the marketplace to undertake VAT collection, so what they are going to make of this remains to be seen. Until something happens, however, it seems pretty likely that anyone in the EU offering digital goods as rewards in a crowdfunding campaign will be selling services directly to the customer and must register for VATMOSS, with all of the vast burdens that entails.
Patreon is rather different, in that you are generally not explicitly paying for something. For example, I can listen to Galactic Suburbia whether I back them on Patreon or not. And the various rewards on offer, in the form of more and better podcasts, are also available to everyone, regardless of patronage. (Update: at the highest backer level there’s an actual gift, but it is a paper fanzine so that’s goods not services.) So, could I put the Salon Futura podcasts up on Patreon and get money that way?
Sadly, I don’t think so. You see, podcasts are digital services, and thus if I get money for them they are liable for VAT. There are some tax rules about being allowed to receive small gifts tax free (up to £2500 a year), but those appear to apply only to charities, not businesses. HMRC would class the money received as a benefit, and benefits are taxable. I would certainly pay income tax on Patreon money if I got any.
The annoying thing is that none of this would matter if ebooks were classed as goods, or if there were a VAT threshold for cross-border digital services sales the way there is for cross-border sales of goods. As I explained yesterday, I can’t see any way that HMRC and the EU will change the classification of digital products, because the large media companies want them classifies as services. But I have yet to hear any sort of rational explanation as to why the thresholds are zero. If all EU countries have high thresholds for cross-border goods trade, why can they not do so for digital services? Why is there this specific attack on the digital economy?