Currently, if you buy something in the EU, VAT is charged at the rate applicable in the seller's country (I don't currently charge VAT as my turnover is well below the UK's threshold for VAT registration).
From January 1st 2015, VAT on the sale of digital products and services will be charged based on where the buyer is located. So if you're in the UK and you buy an e-book or subscribe to an online magazine or download a piece of software, you'll be charged VAT at the UK rate no matter where in the world the company you're buying from is based.
This sounds like a simple change, but it's actually very, very complicated! There will also be no sales threshold, so even if you just have one digital product in your shop and make one sale within the EU that sale falls under these new rules. You can find much more info about this legislation and what these changes mean for small businesses here, here, here and here.
I don't have many PDF patterns in my shop at the moment but my business plan for 2015 had been "list lots of new patterns!!" I already have a bunch of them in progress, and have many more designs (old and new) in a notebook waiting to get stitched and photographed and written up.
|One of my PDF patterns|
Thanks to the new rules, I have to choose between...
A) stopping selling digital products (my PDF patterns)
B) registering for and charging VAT, upgrading / changing my shops to meet the requirements of the new legislation and doing all the complicated data-gathering and admin that goes along with that to make sure I'm complying with the law
or C) selling through a VAT-compliant reseller, i.e. a venue where they will be making the sale for me (and dealing with all the VAT stuff), taking a commission then paying me what's left.
I am choosing option C!
So, I'm going to remove my PDF patterns from my shops on December 22nd (when I'll be closing my shops for the holiday break). Then as soon as I find somewhere to sell through I will let you guys know!
I have my fingers tightly crossed that I can find a solution asap - and also that the designers I love will find solutions that work for them so I can keep buying their lovely patterns :)
In the meantime, you can buy my PDF patterns (along with lots of handmade bargains in my sample sale) from my Big Cartel shop or my Etsy shop. UPDATE: You can get 25% off patterns purchased from my Big Cartel shop with the discount code PAUSE
The new regulations also cover blog ads (the EU's explanatory notes for this new legislation includes "the provision of advertising space including banner ads on a website/web page" in their list of examples of things that fall under the new rules). I may be able to continue to sell some ads but for the moment I'm not accepting any new blog ads or renewals. All my current ads will be unaffected and will run until they expire. Many thanks to everyone who has bought an ad over the past couple of years! xxx
P.S. I am not an accountant! This post is not intended as advice, it's just to let my readers know why I'm making these changes. If you think the new VAT rules may affect you and your business, please do your own research, contact your local tax office, etc.