VAT For E-Commerce BusinessesWritten on August 2, 2018 by Kirk Rice LLP
The Question:
I am planning to start an e-commerce business selling a unique piece of software that I have developed. Customers will be able to download the software from my website following payment by credit card. What I am not sure about is the VAT position because, of course customers could download the software from anywhere in the world. What is the VAT position?
Kirk Rice LLP answers:
E-commerce businesses may sell goods or services via the internet to other businesses (B2B) or to consumers (B2C). These customers may be located within the UK, in another EU Member State or in other parts of the world.
The VAT treatment of e-commerce transactions will depend on the nature of the goods and services supplied and their place of supply, but generally using the internet to buy or sell in a manner similar to the telephone or fax does not affect the treatment of the supplies for VAT purposes. Normal VAT rules apply.
However, special rules apply to electronically supplied services such as the supply of websites or web-hosting services, software, music, films, games, electronic publications and so on, which are transferred electronically or downloaded for a charge. Digitally supplied services where the supplier belongs in the UK are liable to VAT as follows:
- where the customer belongs in the UK and receives a business to business (B2B) supply of services, the services are supplied in the UK and the supplier accounts for the UK tax due
- where the customer belongs in the UK and receives a business to consumer (B2C) supply of services, the services are supplied in the UK and the supplier accounts for any VAT due
- where the customer belongs in another Member State and receives a B2B supply of services, the services are supplied in that Member State. They are outside the scope of UK VAT and the customer accounts for any VAT due
- where the customer belongs in another Member State and receives a B2C supply of services, then the services are supplied in the customer’s country and the supplier accounts for VAT in the Member State in which the customer is located. Suppliers may either register for VAT in each of the EU countries they supply or register to use the VAT Mini One Stop Shop (MOSS). This applies to all suppliers, whether they trade above or below the UK VAT registration threshold
- where the customer belongs outside the EU and receives a B2B supply of services, the services are outside the scope of EU and UK VAT.
Any reader interested in discussing the VAT implications for their e-commerce business can telephone Graham Jennings on 01344 875000 in our Ascot office or James Moody on 020 8789 8588 in our Putney office. You can also email info@kirkrice.co.uk.
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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
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