[EDIT – Scratch all that, Bandcamp have rescued musicians! http://blog.bandcamp.com/2014/12/30/eu-digital-vat-changes-and-bandcamp/ ]
Right, finally, a follow-up with some clarification after my last post and all the edits. This may not end up being the last word on the subject – we’re still pushing for an 11th hour change to the law, or at least a year’s delay while people work out how the hell to comply with this. There are an awful lot of businesses that can’t deal with this at all…
Anyway, the important bit for us is Bandcamp’s updated info on tax.
https://bandcamp.com/help/selling
Go read it. All if it. It’s important stuff.
The summary is that for the time being, Bandcamp will give you all the info you need to pay the new VAT. They’ll determine the country, work out the VAT, add it to the transaction, and them give you a quarterly download to submit.
They genuinely couldn’t do more of it for you.
BUT. The next bit is even more crucial, so I’ll quote it in full:
Under our current system, in which buyers pay you directly, the above is the easiest we can make it for sellers to meet their VAT obligations. In the first half of 2015, we plan to make payments for digital transactions flow through Bandcamp. Among other advantages, this will allow us to take care of everything related to digital VAT, including tax reporting and payment.
So, there’ll be a transitional time while Bandcamp get their tech lined up (they’ve only just found out about this shit too, as they’re a US company and weren’t let in on this any more than the rest of us), then they’ll deal with it for us.
So what to do? We’re stuck with an interim period in limbo. All the questions I’ve asked about registering for VAT for short periods of time have not come back with happy answers – you’d still have to maintain the data on your customers for 10 years, and you’d have to register for that under the data protection act. Deregistering may also trigger an audit. Not fun.
So, here’s what I’m going to do, and if cross border EU sales are as low for you as they are for me, percentage wise, you may choose this too: I’m going to amend the wording on my site to invite listeners from the EU to download the music for free for a few months. If they want to pay for it, they can buy a CD, or the USB stick (which I think will be attached to the subscription for a time, in order to turn that into a physical product), or can email me and make a donation some other way (it’s been pointed out on FB that soliciting payment for the item elsewhere would be tax evasion. Which makes sense. So no, I won’t be asking for money elsewhere. It’ll be free) Or just wait til Bandcamp are geared up to deal with the VAT and pay then.
Or they can get in quick and buy stuff before the end of the year.
If someone does pay for one of the handful of things that have a price on them and would be liable for VAT, I’ll refund them. Early birthday pressies 🙂
The joy of the ‘pay what you think its worth’ economy is the people who enter my orbit are for the most part not those who are seeing what they can get away with. There’s an understanding that sustainability in the music industries involves us all thinking about what we can do to keep independent music production viable. Pay what you can, pay what you think it’s worth, name your price – whatever you call it, the onus is on the listener to be a part of that ongoing viability. A cog in the machine of sustainable music production. This makes that more complex, but we can make it work, right?
As I commented on Twitter earlier, I’m very much a pro-tax kind of person. I like the idea of tax, I’m happy to pay it. But when the tax system stops people from earning the money you want to be able to tax, the system is very broken indeed. Which is what’s happening here.
Anyway, here’s something lovely to soothe your furrowed tax-obsessed brows 🙂
Good words, thank you Steve. I’m likely to be doing a similar thing – was expecting to mothball at the end of the year, this light at the end of the tunnel. And hopefully Bandcamp can now do some jumping up and down alongside the rest of us at the HMRC…
I think (?) bandcamp are wrong here. Here’s the actual text of the regulations when it applies to sales via a third party platform:
Digital portals, platforms, gateways and marketplaces
If you supply e-services to consumers through an internet portal, gateway or marketplace, you need to determine whether you are making the supply to the consumer or to the platform operator. If the platform operator identifies you as the seller but sets the general terms and conditions, or authorises payment, or handles delivery/download of the digital service, the platform is considered to be supplying the consumer. They are therefore responsible for accounting for the VAT payment that is charged to the consumer.
…and they are in the process of completely redoing their payment processing mechanism so they can do that for us. As the platform stands, it’s impossible for them to do it, as they don’t touch the money, and the system isn’t set up to differentiate between payments from different nationalities (because they’ve always stated that users were responsible for tax etc.) … so what they’ve done is make it as easy as possible for anyone who needs to comply to comply up until they have got it sorted.
This is slightly problematic, as it doesn’t leave us with a ‘we didn’t know’ defense – the bandcamp payments will arrive with tax already worked out, but from all the research I’ve done, it’s pretty much impossible to painlessly register for VAT for a couple of months to cover the interim.
My initial reading of the law was the same as yours, and it looked as though HMRC’s fight was going to be purely with bandcamp, but given that I’m getting paid for a load of EU sales that are being taxed, I’d be putting myself in a position of possibly being prosecuted by the VAT department in any EU country… which is ridiculous. So, as I say above, my solution is to give my music away to EU listeners for the next few months til Bandcamp sorts out the payment thing…
I wouldn’t worry too much about an audit on deregistering from VATMOSS. There will be too many micro-businesses deregistering at the same time, and the sums involved will be so trivial that HRMC will not consider an audit cost-effective.
I was VAT audited many years ago for a business I was running, and their attitude was that they wanted to help me make money for them, not catch me out on any trivial mistakes I might have made. So, if you’ve been dealing fairly and not trying to cheat them an audit shouldn’t be too worrying.
Thanks, Bob, that’s reassuring. I still don’t have anything like the accounting structure in place I’d need to comply with vat law re:data collection/retention and making sense of the rules around what would now constitute allowable expenses etc.
Giving some music away for a few months will cost me far less in the short & long term…