Commercial data sent by email liable for VAT

[buying_it]

I came across this recently and thought to find out what other people have done about it?

'If you send commercial data by email or over the Web, it's liable for VAT (17.5 per cent value-added tax, imposed in the UK on services) on the value of the data. Which of course with commercial data can be quite high.'
Source : http://www.theregister.co.uk/2005/05/05/commercial_data_sent_by_email_liable_for_vat/

Does anyone have any experience of a VAT audit and having the C&E determine the actual 'value' of the business data?

I use email to send information to clients all the time and am concerned about the implications of this for my business.

My accountant is looking into the fine detail of the regulations quoted in the article but I thought to see what other peoples experience was.

Thanks,

Andy

[Ozzy]

Basically if you charge a fee for the data then it is a sale transaction, or "service" to use another term, and as you are "selling" that service it is liable for VAT (subject to export, etc etc - I'm assuming you are selling to another UK business).

For example, the Chamber of Commerce sell business data and provide it via email. They then send you an invoice later charging for the data plus VAT.

[SillyJokes]

I'm confused.

You have to charge vat on any service provided.

If the service is sending data than surely you get charged vat on it no matter how it is sent?

[buying_it]

The service I provide is quite simple : I help businesses buy technology (buying i.t. :-)

I act as a temporary middle man for my clients – finding suppliers, negotiating discounts/credit terms, arranging credit accounts, building technology investment plans that match their business plans.

The final outcome is that my client can make the purchase direct from the supplier that I have negotiated the best discount/credit terms with - they haven't had to do any of the chasing around – and I charge a percentage of the amount I save.

But - I email all of the information over to my client of which suppliers I have contacted, what the terms of their offers have been, and a break down on my recommendation of which supplier to proceed with. (Price is not always the determining factor!)

I charge for the service (with VAT) - do I need to charge for delivering the information as well? I would class it as having been included in the service price. Do I just need to itemise it on the invoice? (Which would be the simplest option for one and all!)

I just love the VAT man! He makes life so interesting!

Thanks,

Andy

[BMS]

( I charge for the service (with VAT) - do I need to charge for delivering the information as well? I would class it as having been included in the service price. Do I just need to itemise it on the invoice? (Which would be the simplest option for one and all!)

If you charge VAT for the service, then whatever method you use for transmitting the relevant information is irrelevant.

I send payroll data to one of my clients to enable him to process his employees wages prior to the hard copy information being sent to him by post.

I charge for processing his payroll, but I would not charge him for e-mailing the information to him or posting his payslips.

The VAT is applied to the service not the number of times the data is forwarded or the transmission method used and if you send him a VAT invoice then that is all that is necessary.

[buying_it]

That is nice to know - but the implication of the legislation is that if that data is transmitted in electronic form and has a value it is VAT'able.

I think I need to find a VAT specialist and ask a few questions :-) Maybe the VAT man can untangle this one for me..

Thanks for your replies!

Andy

[BMS]

Hi Andy

Still not convinced.......

I read the article that you refer to and I'm not sure if Paul Redfern is complaining about the fact that he has to charge exempt customers VAT or he is refering to the fact that electronically transmitted data is vatable.

It seems to me that this might relate to broadcasting services rather than data transmission, at least that is what it appears to say on Customs website.

I would have thought that as Mr. Redfern is VAT registered then he has to charge VAT to all customers whether he sends the results of his service via e-mail or not.

I would also find it virtually impossible to administer a VAT scheme solely on electronic transmission of data anyway.

You really should check this out with Revenue & Customs or if you can get some free advice from a tax consultant here even better.

As a worst case scenario surely you could amend the wording of your invoice to read " Vat charged on the transmission of date as a result of XYZ services".

Good luck ............

[Alpha]

I charge for the service (with VAT) - do I need to charge for delivering the information as well? I would class it as having been included in the service price. Do I just need to itemise it on the invoice? (Which would be the simplest option for one and all!)

Andy

At this point you mention above there is no contract and no supply. Your client can either take or disregard your advice. If he disregards it I presume that you would write it off to experience and move on.

Vat is only charged when a taxable supply is made.

I havent read the article you refer to but in the scenario above ther would be in contract law only 'an invitation to treat' which is not vatable. A comparison is made with regard to a shop, the prices that are on the shelves are merely 'an invitation to treat' and a shop does not pay over vat on all its stock merely because it is on the shelf. The contract comes when the customer takes the goods to the tills and exchanges a value for the goods, at this point a tax point is created and vat becomes chargeable.

In the same way when a client of yours accepts your advice then a contract and a chargeable event comes into existance and a tax point is created.

Its really not that complicated in your business.

[buying_it]

I had not thought of it that way - you are right - the contract actually comes into force once I know how much I can save a client - thats when they engage/pay me.

Most of the time I know within 30 minutes of calling round what the ball park is for pricing specific equipment/software, what terms are on offer and how much I can save them.

The rest of my service is straight forward consulting T&M business helping my clients plan their annual IT spend to get the best discounts from their suppliers.

That was a fantastically helpful insight there Alan! Thankyou very much indeed!

Andy

[kyber]

On a slightly related personal note, I now buy and download electronic books in prefrerence to buying dead tree originals most of the time. I get charged VAT on the ebooks. Why?

(I am away from home a lot and like to read to relax but often have more than one book on the go so taking them on my VGA resolution screen IPAQ PDA is ideal).

Stuart

[vigo]

An e-book is classed as an electronically supplied service (service is the key word here), whereas a printed book has a special rate of VAT which happens to equal 0% (or NULL, can't remember).

[kyber]

Damned annoying. Still, the books are usually cheaper than their printed versions even with the VAT added. Plus, no waiting for the post :-)

Stuart