How I aim to work the EU VAT thing plus free spreadsheet
I know some people are a bit confused by the mixed messages yet again being sent out by the EU and HMRC. I thought I’d share how I’m going to work it in the short term, as I’m sure in the long term it can’t sustain itself. I’ve had a think as I’m not going to shut up shop. I think it’s such a shame that some well know quilt pattern designers are closing some of their venues or blocking sales to the EU as it will mean that I personally as a customer will lose out. From a UK perspective, here’s what I plan to do.
Problem: There are different rates of tax for each EU member state.
Solution: I can’t possibly add on an extra flexible charge depending on the customer, so I am going to put all my block patterns up an extra 50c regardless of location, so they will be $2 each and a similar increase will occur for other patterns too on 1st January 2015. This isn’t particularly fair to non-EU shoppers but it makes things consistent. I will then take the VAT out of that purchase depending on the rate shown here: 2015 VAT rates
Problem: I need to keep copies of data for many years for each EU purchase.
Solution: I’m going to stick with the 3rd party providers. Between Craftsy/Etsy and Paypal, “the Cloud” stores all the data that it is possible to capture, without any additional security risks that may arise through keeping the data myself. Transaction history on Paypal works.
Problem: How can I tell where my customers actually are?
Solution: If you look at the screengrab above (if you can see, sorry for smallness) from my Craftsy shop, the vast majority of people don’t show their location and this is the sum total of data that Craftsy shares with the sellers. It’s inadequate. What I will have to do on a weekly or monthly basis is go through the non-free downloads manually and check the location on Paypal as I’ve yet to find a transaction on there with no address. If that fails I will have the Paypal email address of the customer and I will just have to ask them nicely which country they are in if it’s not obvious from the address, but I don’t think it will come to that. It will mean that I’ll be able to do my tax return faster too, as I usually leave all accounting ’til late January. Maybe this will be good for me?
Problem: Registering for MOSS
Solution: I’m only going to do this when my first EU (non-UK as I am in the UK) sale comes in. I don’t need to do it sooner and really there aren’t many transactions this will affect. As with my self-assessment, I’m going to cross my fingers that it doesn’t come right at the end of a quarter to give myself the opportunity to complete it properly as I can’t afford an accountant. Hopefully these tiny VAT returns every now and then from lots of people like me will overturn the decision, but for now we need to keep going and not let them shut down out shops. I’m dreading the day I get my first sale from France or somewhere, but hopefully that will come in the second quarter after the first quarter returns have been done by less fortunate people all amounting to about £1 each that will hopefully put it in perspective for the tax office.
What else I’m going to do
I’m going to sell patterns through PatternsToPrint.com – my friend Sam’s site. She is taking care of all the VAT stuff so the sellers don’t have to. Obviously this comes as a price, but I think an extra marketplace can only be a good thing, regardless of this EU issue.
I’m going to keep raising awareness and trying to get more petition signatories- please sign if you haven’t already to reinstate the VAT registration cap of £81k: https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products
At the time of writing, it needs 2000 more signatures to be debated.
I’m going to keep campaigning for this, but I most certainly am not going to close my shop, stop my BOM or get myself into deep water with HMRC as stubborn avoidance or ignorance is no excuse and I have been on the end of that sharp stick before. I’d love to pull out of using Craftsy since they’re unwilling to help, but honestly I think the footfall the site gets is worth it to me to stay open there, otherwise I’ll have to put a lot more marketing effort into my own shopfront, which isn’t possible for me right now.
Here’s my basic spreadsheet (xlsx) if you want a starting point for your own small scale digital shop. I’m going to use my to calculate my turnover in general as well as deduct tax. Each quarter is on a page of its own and on the first page it totals up the payable VAT. Please use it if you think it will be useful.
Come back tomorrow for a more cheerful linky party about sewing goals for 2015 🙂