Brain taxation

I’m sure you’ve heard already, but there’s a bit of a problem come 1st January when it comes to our little businesses, VAT and selling digital patterns and other products within the EU. If this comes as a surprise, here is a very good blog article explaining it in layman’s terms.

My main personal concerns are:

  • What will happen to my BOM?
  • What about selling my patterns on Craftsy in general?
  • What will this mean in terms of availability to me?

I’ll start with point 3. This affects pattern designers the World over, not just in the UK. I’m not sure how it will work for those say, in the US, maybe they can use the UK Mini One Stop Shop (MOSS) to sort out their sales to the EU. I’m struggling to find much on it, and I’m sure they are too.

If the pattern designers of the US, Canada, Australia and anywhere else that isn’t in the EU are going to block sales of their patterns to us in the UK as one of the EU member states, that is going to have a knock-on effect. Imagine this, say the Sew Together bag for example wasn’t released until 2015. That would mean that none of us in the UK would be sewing it because either a) it would be only made for sale to those outside the EU to avoid the US-based designer from getting into a tax mess, or b) it may have been enough to scare off the designer from releasing the pattern for sale at all.

We are going to be poorer in terms of what will be available for us. I’m finding this pretty scary. If I want something I will have to wait ’til I go to Canada in July and download it whilst on holiday through hotel wi-fi, it seems a bit of a backwards thing to have to do.

This leads to points 1 and 2. On the other hand I can still sell to the US, Canada, etc which is great for me. BUT the headache of trying to electronically block those in the other EU countries somehow myself is not going to happen, nor am I going to be able to figure out my way through the VAT rules and paperwork, and I certainly can’t afford an accountant. But the BOM must go on, and after nine months of work already on this, I don’t want to start making it free from now on. It’s not fair to those who have paid for some of the designs already. Equally, with nine months of work behind me I am not prepared to end it prematurely either- that would be even worse. The BOM must go on.

Third party sites are- theoretically- supposed to be responsible, according to HMRC (check out this flowchart- pinched from Ysolda). However, Craftsy- my current portal of choice- seem to be leaning towards the we’re-not-interested-in-helping-you angle. When paid for patterns nearly completely disappear on 1st January, I’m sure they will think about changing their minds, but really, we’re too close to that date to be sticking our heads in the sand. Here’s a list of third parties currently being more cooperative- great if you’re a knitter, not so much if you do practically anything else.

My solution I think will be that the free pattern will remain on Craftsy for the month it is free. Once it goes up to $1.50 price, or once the full collection is put together at the end of the run I will be transferring over to Etsy.

Don’t get me wrong, Etsy are being just as crappy as Craftsy over this whole thing, but here is the solution, for me at least.

Crafthub.

It’s a plug-in for Etsy. I plan to pay the $8 a month subscription (which basically means I need to sell six block patterns a month to see $1 return) and then list my patterns as physical good and then they deliver on my behalf, with the ability to block out France, Germany and friends. I don’t want to do it, but it may be the easiest solution until Mr VC re-examines this mess (and the thousands of VAT returns for about £2.50).

I’m also considering a co-op with another seller that I won’t name just in case she wants to keep things on the low for the time being. She will register for MOSS and then act as an agent for other sellers in the same boat, though I’m not sure if I will be a good fit for her given the tininess of my patterns (my future bigger ones may well be though, but I get less business from those) this will mean that International selling continues as normal. We shall see what the future brings.

In the meantime, if you haven’t signed the petition to restore the usual £81k VAT threshold, please do. Once the target signatories has been reached, it is supposed to be discussed in parliament, and I think it needs to be discussed, it’s really not been thought through very well. The scariest thing is that this will continue to be a problem in the future as it will also apply to selling physical goods to the EU in the next phase. Lets get this looked at and acknowledged now.

Latest update – Ysolda Teague, Issy Zinaburg and other prominently outraged people in this will be meeting with HMRC officials. Keep your eye out on Enterprise Nation over the coming days and weeks!

P.S. I’m possibly still not fully understanding this, please correct me in the comments if I’ve interpreted anything incorrectly.

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