Digital goods - VAT

[UniqPhotography]

Hi everyone,
I've a business incorporated in London, specialized in digital goods sales, to be more specific, I'm trading which means buying/selling photography rights. Trading doesn't mean it's a 'marketplace' : it's a manual aporoach, that consists in prospecting potential sellers (photographs), buying from them what I suspect to be profitable and match with my client expectations.
At the other hand, I'm selling back the rights to my customers, manual and selective approach also.
My question are :
- So far, the people I was buying the rights from are based in Europe, mostly UK and are companies. Some of them are mentionning VAT on their invoices, some are not. Is that normal ?
- My customers are global, which means they can be in UK, Asia, Middle-East, US : I'm not mentionning any VAT on my invoices when they are not based in UK, but I have the feeling I'm doing something wrong. Do I have to include VAT ? If yes, why a customer based in Singapore will pay for UK tax ?...
- I have two cases where I can litterally lose money: I do a margin of 12-15% avg on my sales. When buying rights inside UK with taxes, selling to a foreign country, if I don't apply VAT as when buying, my Marin will be negative.

Thanks for helping me,

 

[Mr D]

Are you VAT registered? If not then you don't charge VAT.
Whether you should be VAT registered is another matter. What sort of turnover do you have in a 12 month period?

 

[UniqPhotography]

Are you VAT registered? If not then you don't charge VAT.
Whether you should be VAT registered is another matter. What sort of turnover do you have in a 12 month period?

Forgot, yes I'm VAT registered.
My turnover is about 40-60K/month (revenue, not profit).

 

[Mr D]

Forgot, yes I'm VAT registered.
My turnover is about 40-60K/month (revenue, not profit).

VAT isn't done on profit. Its a tax your customers pay that you collect on behalf of HMRC.
Yes you need to charge VAT. The when and the who to pay....
Have you come across VAT MOSS?

 

[UniqPhotography]

Yeah but to be honest I don't understand very well the principle.
I understand that I'm supposed to apply the VAT of the consummer country.. with VAT MOSS not anymore : HMRC doest it for me ?
My concern about VAT is :
- I buy goods, with prices that includes VAT
- I have a customer from a country that doesn't have VAT. If I apply VAT on the sale, I become more expensive and less competitive.
Did I miss something ?
Thanks

VAT isn't done on profit. Its a tax your customers pay that you collect on behalf of HMRC.
Yes you need to charge VAT. The when and the who to pay....
Have you come across VAT MOSS?

 

[Alan]

My turnover is about 40-60K/month

So you are turning over some £700k per year and you are asking on a forum because you don't have an accountant? Crazy!

 

[UniqPhotography]

So you are turning over some £700k per year and you are asking on a forum because you don't have an accountant? Crazy!

. My turnover was not always the one I'm mentioning. It's going well since few months.
. I wasn't targeting global customers in the past but only local ones, which made things easier. I pay VAT, I invoice VAT.

That said, I'm planning to hire an accountant, of course, but i still want to understand the subtilities.

The 'crazyness' you are talking about is the one that helped me achieving what I've modestldy done - VAT mecanisms are not my expertise and I prefer to boostrap a business and spend time/money on rational things when it works.

 

[Alan]

Great you have been successful. My advice is talk to a couple of accountants and find one that understands your business, digital VAT is complex, which is why for my digital goods I only sell via a reseller so they can handle the global tax situation.

 

[UniqPhotography]

Thanks for helping me.
If anyone is in the same situation (digital goods, buying, selling, globally) would appreciate some clues.
Thanks

 

[The Byre]

The 'crazyness' you are talking about is the one that helped me achieving what I've modestldy done - VAT mecanisms are not my expertise and I prefer to boostrap a business and spend time/money on rational things when it works.

You are putting yourself in a very dangerous position and you are skating on thin ice. The UK has the most complex tax laws of any country on Planet Earth - and the laws governing intellectual property (IP) are bonkers complex. By not understanding the rules, you are jeopardising your business. I kid you not!

Every one of the different parts of the various creative industries has a different set of rules and different set of exceptions to those rules. Film is different to photography, film music is different to other music, studio hire is VAT-free to certain nationalities, even when place of service is in the UK, film-studio hire is dealt with differently to recording-studio hire - and to top it all, there are different sets of tax incentives the customer can access over and above the various rules.

Now you have to add to all that, the peculiar and labyrinthine financing and ownership structures that the various creative industries use, in part to avoid taxes, in part to garner subsidies and in part to satisfy the demands of investors, banks and other animals. Film companies usually use more finance and tax experts than actors!

These are the unsung heroes of the movie biz - but you will never see a tax and subsidies expert getting star billing. Barclays has a whole division of such people.

I cannot give you any answers here on specific questions, because the answers and commenting on circumstances depend on knowing every detail - that is the job of an accountant - or five.

 

[UniqPhotography]

Agree with you on the dangerousity.
My point is : I wouldn't be able to study/spend money on that before knowing if I'm able to build a business.
It's a none sense for me to have a whole team to manage that.
It's a risky preference, i agree, but I have seen entrepreneurs spending ressources on legal/financial aspects and not doing anything suscessful on the business one.
I do the opposite.

My concern now is to do it in the right way.
I was just curious to know if someone has a similar experience with digital goods sourced with VAT and global customers, but it seems that there is more variables.

Cheers.

You are putting yourself in a very dangerous position and you are skating on thin ice. The UK has the most complex tax laws of any country on Planet Earth - and the laws governing intellectual property (IP) are bonkers complex. By not understanding the rules, you are jeopardising your business. I kid you not!

Every one of the different parts of the various creative industries has a different set of rules and different set of exceptions to those rules. Film is different to photography, film music is different to other music, studio hire is VAT-free to certain nationalities, even when place of service is in the UK, film-studio hire is dealt with differently to recording-studio hire - and to top it all, there are different sets of tax incentives the customer can access over and above the various rules.

Now you have to add to all that, the peculiar and labyrinthine financing and ownership structures that the various creative industries use, in part to avoid taxes, in part to garner subsidies and in part to satisfy the demands of investors, banks and other animals. Film companies usually use more finance and tax experts than actors!

These are the unsung heroes of the movie biz - but you will never see a tax and subsidies expert getting star billing. Barclays has a whole division of such people.

I cannot give you any answers here on specific questions, because the answers and commenting on circumstances depend on knowing every detail - that is the job of an accountant - or five.

 

[The Byre]

The principles of VAT are about as simple as simple can be - the exceptions are what makes life difficult! For example, B2B rental income is VAT free, unless that is outside your core business - then you have to charge VAT.

I strongly suggest that you get an accountant to look at all your activities and not just VAT. You will save multiples of whatever that accountant will charge you!

 

[Mr D]

Agree with you on the dangerousity.
My point is : I wouldn't be able to study/spend money on that before knowing if I'm able to build a business.
It's a none sense for me to have a whole team to manage that.
It's a risky preference, i agree, but I have seen entrepreneurs spending ressources on legal/financial aspects and not doing anything suscessful on the business one.
I do the opposite.

My concern now is to do it in the right way.
I was just curious to know if someone has a similar experience with digital goods sourced with VAT and global customers, but it seems that there is more variables.

Cheers.

Legal / financial is very important too - and can impact how other aspects of the business are done.

For some businesses they can be the essential building blocks that prevent wasted time, effort and money. If I hadn't started with them I'd have risked considerably more than I want.