Friday, 16 January 2015

An Update On The New EU VAT Rules

Europe map illustration vat hazel fisher creations 2Back in November I wrote about the EU VAT rules that were going to change on 1st January. Well, the new rules are now in force but campaigning for changes to be made to the rules still continues, so I thought I would give you an update and write about how they are affecting my business.

Over the last couple of months, as a result of the campaigning, HMRC came to understand the problems the new rules are causing businesses. They have made some concessions on the information businesses need to collect to comply with the rules (until June). However, there are still a lot of issues which I won’t go into here, but they are explained much better on the EU VAT Action’s website:

I emailed HMRC, asking them to clarify exactly which of my products would fall under the new rules. My customised printables (invitations etc) do not fall under the new rules so I can continue to sell these exactly as I have done. However, my non-customised printables (scrapbooking papers etc.) do fall under the new rules because when someone purchases them I send an email to my customer with a link for them to download the files. If I sent them as attachments in an email they would not fall under the new rules, but the files are too large and my internet connection is too slow to do that. It’s complicated isn’t it!? You can see HMRC’s explanation of what does and doesn’t fall under the new rules here: HMRC’s Guidance on VAT

Another problem is it is still unclear how Etsy (where I sell my printables) is dealing with the new rules and whether they should be responsible for handling VAT. On instant downloads they allow the customer to download their purchase and, if the customer pays by direct checkout, Etsy handles the payment too. I have read in the Etsy forums that other sellers have been told by HMRC that Etsy is responsible. However, after weeks of not responding to sellers, Etsy wrote a blog post just before Christmas saying that they would not be handling VAT but they are working on a tool to allow sellers to deal with the VAT themselves. They said that they would release more details in early 2015. We are still waiting...

Interestingly, Folksy has been more helpful with informing sellers how they are affected and posted another update on their blog which you can read here.  Although I have a Folksy shop, I do not currently sell my printables there, but it is good to know they are communicating with their sellers.

While I wait to see what Etsy will be doing, my temporary solution has been to limit the countries which I sell my non-customised printables to. I altered my listings so that they now ‘ship’ to the UK, USA, Canada, Australia and New Zealand. To keep things simple and save time with altering my listings I just included these 5 countries, as they are the main countries I sell to.  This is not ideal though so I am still looking into a better solution.

I will keep you updated if and when there are any changes.  I hope that more progress will be made soon, especially as it seems they are planning to extend the rules to all products as early as 2016.

If your business has been affected you can fill in a survey on the EU VAT Action group’s website

You can sign the EU petition here too

UPDATE 21st January 2015
Etsy posted an update on their blog last night - they have said they will be handling VAT on behalf of EU sellers for instant downloads!  Unfortunately there are no updates for non-EU sellers.  I still don't know exactly how this will work so won't be changing anything in my shop yet but hopefully it won't be long before there is more news.

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