New VAT rules for digital services

[gimpydog]

Further to a previous thread, has anyone received any definitive advice , direct from HMRC (not your accountant mate from the pub aunt sally team), stating that domain names are a "digital service" for the purposes of that legislation?

Having sought advice from my accountant and having read through the original legislation on the EU website last year, I was of the firm opinion that domain names are certainly not covered & that the OP of the previous thread had received bad (& potentially costly) advice.

However, I note that ICB plc are charging different VAT rates to EU customers for registrations & renewals.

I think they are wrong. Are any other registries or registrars billing in that way?


Further reading...
https://www.gov.uk/government/uploa.../415931/VAT_MOSS_Flow_chart_FSB_edit_V1_0.pdf
https://www.gov.uk/government/publi...o-private-consumers#defining-digital-services
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:284:0001:0009:EN:PDF

 

[grantw]

It took 3 weeks waiting but HMRC confirmed to me that my domain resales would not be classed as a digital service.

There's more to it than just the product though, it's to do with how the sale is conducted - if it's a totally automated, hands-off process then it is classed as a digital service, so most registrars would be included in the legislation.

Grant

 

[grantw]

Here's the 123reg page on it, so I assume all that group and most registrars are covered by the changes :

https://www.123-reg.co.uk/support/answers/Account-Admin-and-Billing/vat-123-reg-invoices-3072/

 

[gimpydog]

Here's the 123reg page on it, so I assume all that group and most registrars are covered by the changes :

https://www.123-reg.co.uk/support/answers/Account-Admin-and-Billing/vat-123-reg-invoices-3072/

Thanks Grant. They would certainly have to apply those rates to things like a 'website builder' service, as that is automated & delivered online, but domains? I'm not so sure.

A registration is essentially a lease. Just because it is bought online does not mean it is a 'digital product' - even the HMRC guidance is unequivocal about that.

 

[gimpydog]

It took 3 weeks waiting but HMRC confirmed to me that my domain resales would not be classed as a digital service.

There's more to it than just the product though, it's to do with how the sale is conducted - if it's a totally automated, hands-off process then it is classed as a digital service, so most registrars would be included in the legislation.

Grant

The legislation was introduced to stop the likes of Amazon setting up in a low-VAT EU country & selling downloads across EU borders to the detriment of other member states' tax authorities. Similarly, TV companies can broadcast from space but do their billing from a tax haven.

I suspect every EU country will have it's own interpretation & implementation. I also suspect some companies will just apply the rules across-the-board to make life easy (for them).

 

[grantw]

Try giving HMRC a call, they were pretty clueless about what was/wasn't included when I rang so you may well get a totally different answer than I got.

Grant

 

[Skinner]

HMRC were a little clueless with me too but they tried explaining that anything which is primarily automated would be included and lots of dibble which I don't remember.

My accountant (at the time I asked) was of the opinion sedo mls (auto sale and transfer) would 100% be a digital service and included, he was 90% sure buy it now domains where only an email is entered to perform a transfer would be included, but domains where research is done to find a buyer or negotiations occur, wouldn't be subject.

He kind of suggested until the rules are applied and tested, it would be difficult to give exact answers. His advice were research and negotiate and be well.

My advice, ignore us all an speak to hmrc and an accountant direct

 

[gimpydog]

I see that Sedo changed the VAT on auction/BIN commissions to reflect the new rules, which seems logical to me.

Transactions not covered by the 2015 changes

The notion of ‘e-commerce’ when commonly used covers various types of economic
activity, including supplies of goods or services carried out over electronic systems such
as the Internet.

Not all of those activities are covered by the VAT changes that will enter
into force on 1 January 2015. In particular the following activities are not covered by these
changes:

1) the supply of goods (including distance selling) where use is made of
electronic systems only to place the order, and

2) the supply of services other than
telecommunications, broadcasting and electronic services. These types of transactions are
not included in the arrangements for the mini One Stop Shop (MOSS).


The scope of the 2015 VAT changes is limited and, as explained above, only covers
telecommunications, broadcasting and electronic services. Those changes are relevant
only insofar as the customer is a final consumer.

http://ec.europa.eu/taxation_custom...t_works/telecom/explanatory_notes_2015_en.pdf

I'm not convinced that domains are, in themselves, an "electronic service"


Btw, the dedicated HMRC email is... [email protected]

Another reason to

.

 

[splashweb]

The HMRC have since confirmed my accountants thinking since my previous thread, ie. if it's a "Buy Now" scenario then they will qualify for VAT, but if it's a negotiated sale then most likely not. I think that's about as clear as it gets from the HMRC, and will only become "crystal" once tested in the courts.