New EU VAT Regulations: The E-Pub Storm Is Brewing

Writers and Self-Assessment

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As a UK-based, self-employed writer and publishing press owner, the 5th of April marks the beginning of my new financial year and it is my time to do the tax return. I was discussing the ins and outs of filling these forms with a friend, who was not aware of the new EU VAT regulations. This prompted me to create a little summary/reminder for those of you who missed the e-publishing storm.

Anyone who sells digital services (such as e-books) to people living in EU member states is probably aware of the controversy generated by the new regulations.

In a nutshell, the supplier will now be responsible to account for the VAT on the product supplied, to the tax office, at the VAT rate of the consumer’s member state.

For example, UK writer X sells an e-book directly from their own website to a customer in Italy, one in Germany and one in France. X must obtain 2 pieces of information to confirm where the customer lives (such as billing address and phone number), to prove that the right VAT has been applied.

It came into effect on the 1st of January 2015 and was aimed at removing the advantage of EU member states with a lower VAT rate than the UK. Unfortunately, the repercussions have been felt more harshly among micro businesses which, as a result, may have to close.

For many small publishers, run by one or two people (and often as a side job), the task of chasing VAT on all products sold is a daunting task. They may not have the know-how, or the time, and to hire someone to do it for them could cost them more than the income generated by the sale of a small number of e-books.

Some micro businesses have already packed up, deciding that it’s not worth the hassle, leaving their spot in the race to the bigger players who continue to gobble the e-publishing market. Because let’s face it, the only way to ignore all this is if you supply your e-books through a third-party platform, digital portal, gateway or marketplace (i.e. not your own website).

As information change, and updates and amendments keep arriving, I would suggest UK publishers keep an eye on the government website (https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers). There are two useful documents there, one of which is a flowchart to determine your position.

Finally, for those interested, there is a petition in place to halt these changes: https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products.