What a crazy couple of VAT filled weeks!!!
Thanks to Twitter and the hashtags #VATMOSS #VATMESS, word has finally got around about the new VAT legislation for EU digital sales that comes into effect as of January 2015 – the upshot is the knitting and crochet world is suddenly discussing more about VAT than we are about stitches ;)
The quick and dirty interpretation of the new legislation is that VAT (as of January) will no longer be calculated based on seller location but on buyer location. There are currently 28 EU member states (all with different VAT rates) and each wants their own cut. Ysolda has a wonderfully detailed breakdown of this legislation (from the conference we attended in Edinburgh) over on her blog. There is currently still a lot of information which needs clarifying and even the experts are having difficulty in agreeing on their answers. But it does seem, that ultimately, pattern sellers fall under this new rule and things will need to be changed.
So what is my position on this and how will it affect my customers?!?
I started selling patterns a few years ago while at home on maternity leave. Having this extra income was great for little extras for the family. I registered as a sole-trader for self-assessment purposes and all was well in my own little world ;) Since then, Thomasina Cummings Designs has grown. I sell patterns worldwide including the intra-EU countries (i.e. EU countries other than my own the UK). I now have a significant income for what I do although, I am no-where near the £81,000 VAT threshold here in the UK. Yet, despite being under the existing threshold, this new rule still affects me – in fact, it affects anyone who makes a digital sale to the EU…even just a single sale.
I have no doubt that Ravelry, Etsy, Craftsy, et al will have individual solutions (in fact, Ravelry has already announced theirs here) but I’m a sucker for wanting continuity among my shops…everything from listing info to pricing (where possible).
So, my current plan (though this may well change) is to register for VAT and sign up to use the VAT MOSS system by January.
You may recall, I mentioned previously, the Excel spreadsheet I use to keep my sales records for self-assessment. Well, this is now updated (Accounts VAT VERSION Blank) to include a country column (on the Transactions sheet). The country codes I used are on the Running Summary sheet. Providing the correct country name is entered (and this can be accessed via PayPal on the whole), the Summary will total all sales to the individual countries. Starting a new one each quarter should make my quarterly VAT MOSS entry a doddle and still enable me to complete my self-assessment with ease – feel free to use it, play around with it, edit it, etc for your own needs. You can view the formulas if you need to add/remove countries or change currencies, etc.
UPDATE 30th Nov 2014: This Accounts VAT VERSION Blank now contains VAT calculator for anyone who wants to experiment with it – The calculation of ‘VAT owing’ to each EU member state is based on inputting into the Transaction Sheet a total price (i.e. one that is inclusive of VAT at the rates shown). Don’t hesitate to contact me if you spot an error, or need to query something. PS this is set up to work for UK users who will be declaring zero returns on UK sales and claiming a percentage of VAT back based on actual intra-EU sales
Now all I need to do is figure out how to obtain (and store for 10 years) two pieces of non-contradictory evidence re the location of each customer without breaking any data protection rules…wish me luck!