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Removal of Paid-For Electronic Downloads/Services: January 2015

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PoC

With the new UK/EU tax regulations coming into effect on 1st January 2015 we'll be removing all paid-for electronic products and services from YSDC by the end of the year (PDFs, music, videos, discrete advertising purchases etc.).

 

So if you're after anything along those lines from us then this month is a good time to get them. ;-)

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Paddurz

Sounds like a nightmare. Where does this leave patron-only media and the patron subscriber system?

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Shimmin Beg

Sounds like a nightmare. Where does this leave patron-only media and the patron subscriber system?

 

That sounds like a very important question, because an increasing number of places are using similar systems :(

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PoC

That won't change. Any files/facilities provided for Patrons are done so simply as a "thank you" for supporting us (in theory there could be no files at all!) - it's not a direct quid pro quo commercial transaction. We've always tried to be quite clear on that. ;-)

 

It does mean our direct banner advertising offerings have had to be removed (though if someone takes up a Publisher Supporter account they can still get advertising as a thank you for that support).

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Shimmin Beg

It sounds like a real annoyance for you - hopefully not too much of a financial hit as well (although I'm pessimistic).

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PoC

The changes will affect many thousands of people in the UK (it's predicted a not insignificant number of smaller digital-based businesses will fold as a result).

 

Fortunately(?) for us it's site patronage that mostly keeps us going, though the changes will still have a noticeable impact, including some of the things we were planning for 2015.

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Shimmin Beg

A few people I know are affected, so I've been trying to follow this while on the other side of the world and signing the relevant petitions.  I'd hoped the last-minute concessions I've seen mentioned would be enough to get small businesses off the hook, but they seem on closer inspection to be of limited use.  That is very underwhelming - small business folding is exactly what you need at any time, let alone when the economy's on the rocks.  Still, I'm glad to know YSDC isn't in immediate danger, thanks Paul.

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Azimuth

I'm afraid I'm totally ignorant of these tax regulation changes - could some kind soul give me a precis? :)

 

(Does this affect eg. PDFs downloaded from the Innsmouth House store, for instance?)

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Aklo

It isn't possible to keep these services open for US and other countries is it? Unfortunate turn of events Paul, and hopefully we can come up with a windfall of some kind to ease the financial blow.

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Shimmin Beg

I'm afraid I'm totally ignorant of these tax regulation changes - could some kind soul give me a precis? :)

 

(Does this affect eg. PDFs downloaded from the Innsmouth House store, for instance?)

 

I will attempt one, but am no expert.

 

To tackle multinational tax evasion, the EU is changing rules on VAT for digital services.  They now will be charged on the customer's country, rather than the supplier - the aim being to stop Amazon et al. from "providing" all their digital services from a small cardboard box in Luxembourg.  A laudable aim.

 

Unfortunately, this means suppliers of paid-for digital stuff are being required to register for VAT in every single country where their products are bought.  A hack offered by HMRC was to avoid all the admin by using a one-stop service VATMOSS; however, using this would automatically make you liable for VAT no matter how small your turnover.  The normal threshold is £81k so that's a pretty massive difference!

 

(An early build would have forced you to pay VAT on UK sales despite the threshold; this has now been returned to the normal threshold, but non-UK sales remain a problem.)

 

So selling digital stuff within the EU will incur a potentially massive admin headache and substantial costs dealing with that, but it's also very difficult to avoid if you're an online seller.  Also, everyone hates region restrictions and you're not exactly going to make friends by telling potential customers that you won't sell to them because of where they live.  The compliance looks like a nightmare (2 proofs of address to buy a PDF?) and suggested workarounds are not really feasible for small traders, who are often one-person or family businesses.  So while Amazon etc. will hopefully be affected, in some ways big companies will manage much better under these rules.

 

http://www.theguardian.com/small-business-network/2014/nov/27/micro-businesses-vatmoss-your-reaction-new-eu-tax-laws

 

http://rachelandrew.co.uk/archives/2014/10/13/the-horrible-implications-of-the-eu-vat-place-of-supply-change/

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yockenthwaite

I'm afraid I'm totally ignorant of these tax regulation changes - could some kind soul give me a precis? :)

 

(Does this affect eg. PDFs downloaded from the Innsmouth House store, for instance?)

 

I was reading about it last night, curious because (1) it badly affects something I'd planned to help YSDC, and (2) it is going to affect me selling a £6 PDF (which I hardly ever sell any copies of) through my own website.

 

Two good articles I found are:

 

http://www.theguardian.com/small-business-network/2014/nov/25/new-eu-vat-regulations-threaten-micro-businesses

 

and

 

http://techcrunch.com/2014/11/25/eus-new-vatmoss-rules-could-create-a-vatmess-for-startups/

 

And, yes, PDFs sold through Innsmouth House are exactly the sort of thing that would be a costly, bureaucratic nightmare now, and are stopping as a result.

 

I am also going to have to stop selling my own PDF as a result. Thankfully when I told my husband about this last night he raised the subject. I'd forgotten about my PDF!

Oh and the petition against this, at least the one I found last night, can be found at

 

https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products

 

This is a UK-based petition, addressing the relevant UK authorities. It calls on them to restore the VAT threshold so smaller businesses are not affected at least financially by this change. I'm not sure it deals with the admin issue though.

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Shimmin Beg
Oh and the petition against this, at least the one I found last night, can be found at

 

https://www.change.org/p/vince-cable-mp-uphold-the-vat-exemption-threshold-for-businesses-supplying-digital-products

 

This is a UK-based petition, addressing the relevant UK authorities. It calls on them to restore the VAT threshold so smaller businesses are not affected at least financially by this change. I'm not sure it deals with the admin issue though.

 

Sorry to hear you are affected. I'd also had vague ideas that some of the nonsense I come up with could be turned into something YSDC might flog for server costs... alas.

 

As I understand it (poorly) restoring the threshold would spare them UK-based VAT registration admin, but not much else. You don't need to register for VAT if below the threshold, so the admin doesn't apply. I don't see anything to confirm that they wouldn't need to prove all their customers were UK-based, which is pretty massive - that kind of faff is enough to deter a purchase (for me, at least). But maybe that information exists somewhere.

 

So, people may be interested in some messages from HMRC on Twitter (https://twitter.com/HMRCcustomers/with_replies), some highlights below:

 

Here:

Statement: "An e-service is one that is fully automated and involves no or minimal human intervention."

 

Then this one:

"Manual downloads will be exempt."

 

Also this one

Statement: "To clarify manual download, files attached to manually-produced emails are not e-services."

 

And then this one

Customer Q: "To be clear, regardless of how you're paid, if you hand send out the download emails, it's not an e-service?"

HMRC A: "If you manually attach the download to an email it is exempt providing the email is also manually sent."

 

Although other things are just incomprehensible.

 

I would suggest reading this guidance (as far as I know nothing better is available) as if it's actually true, it seems people like Yockenthwaite may be able to find a way around the issue by emailing files. I do not for one second claim to understand this stuff though.

 

Okay, I should really go to bed.

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hamster

How will this affect purchases made through DriveThruRPG?

 

I normally get PDF's from there, as it's cheaper to buy in dollars?

 

Or is it not something that will change as this website is 100% not based in the UK?

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PoC

Not everything is crystal clear at this time (as Shimmin Beg's post indicates).

 

However right now we have to err on the side of caution, so I've pulled the YSDC files on DriveThruRPG/RPGNow as well.

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GBSteve

I think DriveThru's position is that this is some foreign nonsense they are happy to ignore. However, whether HMRC will take that view on British publishers who sell through DriveThru is yet to be seen.

 

Tim Gray, rpg publisher, has a good blog entry on the subject: http://wordsthatchangetheworld.com/2014/eudigitalvat/

 

And then there's this cartoon by Dave Walker: http://davewalker.cc/vatmoss-cartoon/

 

Overall there is a lack of clarity around the issues with sometimes contradictory opinions coming from HMRC. How this might affect French or other European publishers, I've not heard.

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wombat1

Ok, let me ask this:  Is anyone aware of a tax treaty between the United States and any EU nation which requires the parties to collect sales taxes/VAT rather than just income tax.  If not, why would an American-domiciled company be required to collect VAT at all on e-anything sent from the United States?

 

The transaction I envision would look something like this:

 

1. "American distributor" takes orders from, well, anyone for 'publication x.'  Since at present American e-commerce is not charged sales tax on a state level, no permits are needed there. If there is no tax treaty, then American distributor is under no obligation to collect VAT for a foreign jurisdiction.

 

2. American distributor then orders copies of publication x from "European author/publisher" on a case by case basis, to be filled manually in both steps 1 and 2, thus complying with the guidance of the revenue authorities. Since American distributor is not the end user, and is not an EU citizen, my understanding is that no VAT liability arises.

 

3. American distributor then sends copies by email to end recipient, and accounts are settled.

 

Am I missing something?  I agree it is all rather a colossal pain for folks who are being entrepreneurial and trying to make a little extra on the side, or to engage in what is essentially a labor of love.

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DadsAngry

I don't know if it changes anything but American e-commerce businesses that have brick and mortar stores in that state must charge sales tax.

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Azimuth

Thanks for the explanations and the links - hopefully this (rather bizarre and confusing) situation will end up to be short-lived.

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jlynn

Shimmin Beg said:

 

<snip>

 

"So selling digital stuff within the EU will incur a potentially massive admin headache and substantial costs dealing with that, but it's also very difficult to avoid if you're an online seller.  Also, everyone hates region restrictions and you're not exactly going to make friends by telling potential customers that you won't sell to them because of where they live.  The compliance looks like a nightmare (2 proofs of address to buy a PDF?) and suggested workarounds are not really feasible for small traders, who are often one-person or family businesses.  So while Amazon etc. will hopefully be affected, in some ways big companies will manage much better under these rules."

 

 

Imagine my surprise that yet another official bureaucratic decision  *gasp*   creates an enormous hurdle for small businesses and individuals whose competition might somehow adversely affect the bottom line of a major corporation, yet which major corporations will find less onerous by virtue of their very size.  I'm shocked, simply shocked, I tell you!

 

Sounds like Britain has been taken over by our US IRS....

 

 

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DadsAngry

Not an expert but I am a gamer and can min/max with the best of them. I found this little tidbit off the GOV.UK.
 
5. When not to charge VAT
You can’t charge VAT on exempt or ‘out of scope’ items.
Out of scope
Some goods and services are outside the VAT tax system so you can’t charge or reclaim the VAT on them. For example, out of scope items include:

  • goods you sell as part of a hobby - like stamps from a collection

Roleplaying games are consider a hobby.
 
Also the found this:
 
VAT registration
 
1. Overview
You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £81,000. You can register voluntarily if it’s below this, unless everything you sell is exempt.
 
Now does register voluntarily mean that you don't have to claim it if you want it's voluntary?

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Paddurz

As far as I have understood it, it's not the UK VAT that is the main issue. The major problem is that if your customer is located in Germany (even if your internet shop is located in the UK) you have to pay German VAT on that particular sale. Also, the issue is how to confirm or understand which country your customer is located in.

 

It's right sorry mess indeed. And due to the fact you have to pay VAT in the customers country you'd have to have full understanding of each country's VAT code and levels, including exemptions. To be fully versed in the tax code of all the countries in the EU is nigh on impossible for a small businesses.

 

Again we can the EU for another idiotic scheme.

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Shimmin Beg

Some goods and services are outside the VAT tax system so you can’t charge or reclaim the VAT on them. For example, out of scope items include:

  • goods you sell as part of a hobby - like stamps from a collection

Now does register voluntarily mean that you don't have to claim it if you want it's voluntary?

 

As always, disclaimar; IANALBIWAL :)

I Am Not A Lawyer But I Was A Librarian

 

 

It would be nice, but unfortunately, my reading says no on both counts.

 

The 'hobby' disclaimer looks very much to be aimed at hobbyists specifically, rather than sellers.  I'm 99% confident that their meaning here is that collecting-trading hobbies, like stamp or football card collection, are not covered.  Here, exchange and sale of items is an intrinsic part of the hobby.  In contrast, RPGs are not about trading items; rather, some people ("merchants" essentially) sell rulebooks, scenarios and other materials to hobbyists.

 

Sedley, who is currently selling SIZ 100 of CoC merchandise via the forums, is probably covered, although even there I'm not entirely sure.  But the talk is all of them as collectors' materials and it seems okay to me.  However, I don't think they would for a moment accept YSDC or DTRPG's sales as being part of a hobby.  In fact, I think it would be very difficult to convince them that any digital content falls under that exemption, because digital stuff is almost always copied rather than traded - there's no rarity element and typically you can't transfer ownership from one person to another.  But that's by the by.

 

Voluntary registration is this:

You don't normally have to register for VAT in the UK unless your turnover is £81k or more, as this is the threshold where you normally pay it

You can voluntarily register despite being under the threshold - this has some accounting or legal value, but I don't know about it. 

From this site (rachelandrew.co.uk):

* If the majority of your sales are to VAT registered business customers then registering for VAT doesn’t make you more expensive in real terms. VAT registered companies pay the VAT and claim it back in their VAT Return. Claiming back VAT is the real benefit of being VAT registered for small businesses. For example if I purchase a computer at £1,000 inc. VAT, I can claim back £200 in my next VAT return.

* If the majority of your sales are to consumers of very small businesses who are not VAT registered then you either become more expensive by adding 20% VAT in the UK on top of your charge OR you take a cut in profit by paying that VAT yourself.

 

 

 

However, other countries generally have much lower thresholds or none.  Thus, as soon as you sell anything at all to other EU countries, you now must register for VAT with that country or with the VATMOSS scheme (which lets you deal with one entity rather than every country individually).  It's not yet clear to me whether you also need to collect customer location data even if you're only selling within the UK!

 

So no, it's not a simple matter of deciding not to collect and pass on VAT... otherwise nobody would.

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Lisa

Okay, so -- which files on this site are we talking about? Could you give me a few examples? Are we talking anything someone puts on this site for free? Are we talking only things that cost money?

 

From a practical consumer point of view, what do I need to grab and download, and what is likely to stay?

 

I'm sorry if this is obvious to folks, but... I'm very, very confused.

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Shimmin Beg

Okay, so -- which files on this site are we talking about? Could you give me a few examples? Are we talking anything someone puts on this site for free? Are we talking only things that cost money?

 

From a practical consumer point of view, what do I need to grab and download, and what is likely to stay?

 

I'm sorry if this is obvious to folks, but... I'm very, very confused.

 

Free stuff isn't a purchase, so VAT isn't relevant, whether Paul or someone else provides it. 

 

Paul has confirmed that Patron materials are also unaffected, since nobody is buying these.

 

As I understand it, the only issue is Innsmouth House Shop digital items: Fungi from Yuggoth, The Many Deaths of Edward Digby and suchlike, and direct-purchase banner ads.  Hard copies are unaffected.

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Lisa

So... basically, digital items found in the Innsmouth House shop? Anything else?

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