Vat

[Jamie W]

Need a little guidance on VAT (sales tax)....

Currently I am a non VAT registered, limited UK company.

When I start selling PC and Mac games, will I need to collect VAT for payment to the appropriate tax authority (dependent on country)?

As I am not VAT regsistered in the UK, I assume I do not need to pay VAT to the UK VAT man, as I would need a VAT number to do so. Is that correct? Or are there special rules relating to sales tax on selling software?

Thanks,

[Desktop Gaming]

Think I'll subscribe to this thread! In the process of going through all of this myself so keen to get other people's comments who have already done it.

From what I've read, if you register for VAT (whether compulsory or voluntarily), you have to collect and pay VAT at the rate set in the country you are registered - just like when you buy stuff from ShareIt (Germany) and pay 19% VAT. I think the VAT threshold is £70,000 now. VAT registration if your annual turnover is below that, is voluntary. Otherwise, it's mandatory.

[Nutter2000]

That's correct, so long as your turnover is below the VAT threshold of course you can't reclaim or offset expenses against it either.

You charge VAT at the UK rate (or rate of your country or dimension of residence) but only within the EU. Sales from outside the EU such as the US are tax free (currently).

[Jamie W]

Thanks.

I was talking with another developer about this stuff; and from what I understood, it could be more complex. You need to register for VAT when your vat-able (is that a word?) sales are above ~£70k. So, that doesn't include income from the likes of Apple (who pay sales tax from the 40% cut they take). I'll try and dig out more info on it (and I could be correct or incorrect; but doesn't hurt to get clarity on this stuff).

Also, as I'm not VAT registered, that's informing my choice of which payment provider to go with. For example, Fastspring, will add on VAT regardless. So, even if I'm not VAT registered, and I'm using Fastspring; my customers will be charged VAT. Which means if I want people to be able to buy my game for say £10, I would need to sell it at £8.33; take off 8.9% (74p, which goes to Fastspring), and that leaves £7.59 for the developer, on a product the customer pays £10 for (equates to about 24% of each sale).

Actually, I'm just confirming the above with Fastspring; I could have got it wrong. Will update when I get more info from them...

I know with BMTmicro, you can opt-out of charging people VAT.

Any thoughts on all that?

[Nutter2000]

Yes, it can be complicated.

HMRC view you as supplying a product to Apple who then sell on to the consumer.
So Apple must take the VAT as they're at the consumer end of the supply chain and you can theoretically claim back the VAT on your sale to Apple because you're selling the product on for resale.
http://iphonedevsdk.com/forum/busine...-question.html
http://www.flexicoder.com/blog/index...ny-vat-return/

So if you are not VAT registered then you can't claim the VAT back/offset it against expenses.

I would strongly recommend talking to a good accountant about it though because it can be a real head corkscrew so I'm not entirely sure what I've written above is completely correct and I've been dealing with these issues for 10 years! (crikey that long)

[Nutter2000]

Regarding your Fastspring question, I would suspect it's the same as the Apple situation I described above.
I suspect HMRC will view it as you are supplying your product to Fastspring who are then charging the consumer.
So in that case, assuming Fastspring are EU based, Fastspring will obliged by law to charge EU consumers the VAT.

But again, talk to an accountant!
I can get my head around many difficult things but UK tax law is still a mind bender! ;-)

[Desktop Gaming]

I do think that if you're in the realms of VAT, then an accountant is a good move since in the long-run, they'll save you more money than they cost you. They know every rat-run and loophole in the system and will use it to your advantage.

[Jamie W]

Yes, it can be complicated.

Agreed! It's fairly complex!

HMRC view you as supplying a product to Apple who then sell on to the consumer.
So Apple must take the VAT as they're at the consumer end of the supply chain and you can theoretically claim back the VAT on your sale to Apple because you're selling the product on for resale.

http://iphonedevsdk.com/forum/busine...-question.html

Yep, Apple have the sale to the end-user; which they need to apply VAT / sales-tax to that. However, I don't think the part about claiming the VAT content of each sale (by Apple) back is correct. I don't think that is at all possible. I think he (chap on the thread you linked to) was talking about claiming VAT back on other business expenses (like hardware etc).

So if you are not VAT registered then you can't claim the VAT back/offset it against expenses.

I would strongly recommend talking to a good accountant about it though because it can be a real head corkscrew so I'm not entirely sure what I've written above is completely correct and I've been dealing with these issues for 10 years! (crikey that long)

I don't think it need be terribly complicated, and accountants may actually make things worse, obfuscate things, keep you in the dark, dependent on them, etc. At least, that's been my experience; it's very hard to find a good (honest) one.

It makes sense to me, to pool and share this information with other developers; rather than everyone individually forking out for the advice of accountants, to essentially receive the exact same information.

[Jamie W]

I do think that if you're in the realms of VAT, then an accountant is a good move since in the long-run, they'll save you more money than they cost you. They know every rat-run and loophole in the system and will use it to your advantage.

Sounds good, if you can find a decent accountant; who will be transparent and honest with you.

I was also told (by another developer, who paid quite a bit to specialist accountants), that it's only the vat-able portion of your income you need to consider; when deciding if you need to register for VAT or not.

Which would mean; you could get £100k of income per year from Apple (which has already had VAT paid on it); and £30k from sales from your own site (which you have sold direct to the end-user, so you'd need to pay VAT on that, if you're registered); so your total income is £130; but no need to register for and pay VAT.

Not making a statement of fact there; just passing on what I was told by another developer.

[Nutter2000]

Yep, Apple have the sale to the end-user; which they need to apply VAT / sales-tax to that. However, I don't think the part about claiming the VAT content of each sale (by Apple) back is correct. I don't think that is at all possible. I think he (chap on the thread you linked to) was talking about claiming VAT back on other business expenses (like hardware etc).

Ah yes you might be right there.

I don't think it need be terribly complicated, and accountants may actually make things worse, obfuscate things, keep you in the dark, dependent on them, etc. At least, that's been my experience; it's very hard to find a good (honest) one.

Well, I found a good one and I married her ;-)

However, unfortunately HMRC also make things worse, obfuscate things, keep you in the dark, dependant on them... with the added bonus of occasional surprise, guilty-until-proven-innocent, excruciatingly anal and painful tax inspections :-(
Which is why I prefer to pay out for someone who is at least supposed to know what they're doing.

But it's your call after all, I wouldn't presume to tell you how to run your business :-)

It makes sense to me, to pool and share this information with other developers; rather than everyone individually forking out for the advice of accountants, to essentially receive the exact same information.

Problem with that is sometimes you just all go wrong together ;-)
But I agree sharing information is usually a good thing :-)

[Desktop Gaming]

Just wondering, as somebody who sells games through third-party, non-UK publishers and collects royalties on those sales, where would I stand VAT-wise?

I've been googling away but not really found anything out, other than it seems to be a very grey area. I'm collecting royalties, but not actually selling anything to anyone per se, so logically I shouldn't be paying VAT. But I can't see the HMRC seeing it that way.

Any help?

[Nexic]

No, you shouldn't have to worry about VAT in that case. You are dealing with a US entity (so no VAT implications there) and the US entity doesn't need to charge VAT to customers since it's non-EU. So fine in a publisher/retailer situation (although quite possible some HMRC twit will try to argue otherwise). But if we're just talking about a payment processor it's a bit different. In that case it is you making the sale, and the payment company is simply acting as an agent. In which case VAT needs to be charged to any EU based customers. Some payment processors (such as BMT) will automatically collect and pay this on your behalf. Others (such as PayPal) don't, and you have to figure it out yourself.

I used to worry about VAT a lot before I was registered. But once it was done it wasn't such a big deal. Only a small percentage of our sales are from the EU and we end up reclaiming a fair portion of this anyway.

[Jamie W]

But if we're just talking about a payment processor it's a bit different. In that case it is you making the sale, and the payment company is simply acting as an agent. In which case VAT needs to be charged to any EU based customers.

As far as I understand it; that's only the case if you are VAT registered. If you're not VAT registered, there is no need to add VAT on to each sale.

[Nexic]

Yes obviously all of what I said only applies to those who are VAT registered...