Please see my blog on the EU VAT changes coming into force on 1 January 2015 and what it’s all about.
This blog specifically addresses the definition of Electronically Supplied Services, as it is such a minefield.
It may be worth checking out and joining the Digital VAT 2015 Facebook group, whose members are businesses from across the global discussing the issues surrounding how they will deal with the EU VAT changes.
So this is the list of electronically supplied services provided by HMRC:
- supplies of images or text, such as photos, screensavers, e-books and other digitised documents eg, pdf files
- supplies of music, films and games, including games of chance and gambling games, and of programmes on demand
- online magazines
- website supply or web hosting services
- distance maintenance of programmes and equipment
- supplies of software and software updates
- advertising space on a website
There is an even more detailed list at the bottom of this blog from the EC Explanatory Notes published 3 April 2014 (the full document can be viewed here). HMRC has also created a handy table defining who is affected, and what supplies fall into the new rules.
This affects millions of micro-businesses, including “kitchen table” businesses who may only sell very small amounts of digital downloads per year, but they are still caught by the rules. Examples might be sales of knitting patterns, ebooks, music by unsigned bands etc.
The best solution for any small business caught by the rules is to ensure that you are selling your digital services through a third party platform. In which case the third party platform are responsible for implementing the new EU VAT rule changes. Please refer to your third party platform for their guidance, and also keep up to date with this thread on the Digital VAT 2015 Facebook page: Responses from Third Party Platforms.
If this is not an option for you, then consider recoding your website so that it collects the correct data (see my earlier EU VAT guidance) necessary to comply. Alternatively, use a third party add-on such as Taxamo or contact myself or Jon Leighton at iResources (ecommerce specialists).
Questions you may have:
1. What if I supply bundled or packaged services, and only a small part of this is a download?
This is a grey area, so you will need to seek specific advice from your accountant or HMRC, but if the download is a very small part of the package, and the package you provide to consumers has “more than minimal human intervention or interaction” the new rules shouldn’t apply.
2. What if I am providing a subscription based SaaS (Software as a Service)?
You will be caught by the rules, unless you are providing human support and/or training, as above.
3. Where do I go to for more advice?
Have a look at my blog covering the main aspects of the new EU VAT Rules, and please get in touch if you want to discuss your specific issues further, but also look at these pages:
Digital VAT 2015 Facebook page
HMRC Mini One Stop Shop (VATMOSS)
Thank you for reading. Remember, the above is only a guide, and you may need more specific advice and guidance. Keep checking back for updates too.
Sharon Pocock FCCA
Extract from EC Explanatory Notes on the EC VAT Rule Changes, detailing electronically supplied services:
(1) Point (1) of Annex II to Directive 2006/112/EC:
Website supply, web-hosting, distance maintenance of programmes and equipment;
(a) Website hosting and webpage hosting;
(b) automated, online and distance maintenance of programmes;
(c) remote systems administration;
(d) online data warehousing where specific data is stored and retrieved
(e) online supply of on-demand disc space.
(2) Point (2) of Annex II to Directive 2006/112/EC:
supply of software and updating thereof;
(a) Accessing or downloading software (including procurement/accountancy
programmes and anti-virus software) plus updates;
(b) software to block banner adverts showing, otherwise known as
(c) download drivers, such as software that interfaces computers with peripheral
equipment (such as printers);
(d) online automated installation of filters on websites;
(3) Point (3) of Annex II to Directive 2006/112/EC:
supply of images, text and information and making available of databases;
(a) Accessing or downloading desktop themes;
(b) accessing or downloading photographic or pictorial images or screensavers;
(c) the digitised content of books and other electronic publications;
(d) subscription to online newspapers and journals;
(e) weblogs and website statistics;
(f) online news, traffic information and weather reports;
(g) online information generated automatically by software from specific data
input by the customer, such as legal and financial data, (in particular such
data as continually updated stock market data, in real time);
(h) the provision of advertising space including banner ads on a website/web
(i) use of search engines and Internet directories
Point (4) of Annex II to Directive 2006/112/EC:
supply of music, films and games, including games of chance and gambling games,
and of political, cultural, artistic, sporting, scientific and entertainment broadcasts
(a) Accessing or downloading of music on to computers and mobile phones;
(b) accessing or downloading of jingles, excerpts, ringtones, or other sounds;
(c) accessing or downloading of films;
(d) downloading of games on to computers and mobile phones;
(e) accessing automated online games which are dependent on the Internet, or
other similar electronic networks, where players are geographically remote
from one another.
(f) receiving radio or television programmes distributed via a radio or television
network, the Internet or similar electronic network for listening to or viewing
programmes at the moment chosen by the user and at the user’s individual
request on the basis of a catalogue of programmes selected by the media
service provider such as TV or video on demand;
(g) receiving radio or television programmes via the Internet or similar electronic
network (IP streaming) unless the programmes are broadcast simultaneously
over traditional radio and television networks.
(5) Point (5) of Annex II to Directive 2006/112/EC:
supply of distance teaching.
(a) Automated distance teaching dependent on the Internet or similar electronic
network to function and the supply of which requires limited or no human
intervention, including virtual classrooms, except where the Internet or similar
electronic network is used as a tool simply for communication between the
teacher and student;
(b) workbooks completed by pupils online and marked in an automated fashion
without human intervention.