If you are selling or planning to sell digital products like e-books, e-courses, then you have probably become aware of the EU bombshell, also known as the VAT MOSS Mess that has recently been imposed on us.
As from 1st January 2015, any sales of digital services (which includes digital products like e-books, e-courses, etc) that come from the EU are liable for VAT at the rate of the country of the consumer.
Given that some EU countries have zero thresholds, this means that even if you are exempt from registering for VAT in the UK, you still have to register for and collect VAT in every EU country you make a sale in.
As you can imagine working out what VAT to charge in which country as well as collecting it and making sure it’s paid to the correct authority is a logistical nightmare so, HM Customs have introduced the VAT MOSS scheme – Mini One Stop Shop. This means instead of making multiple returns to each EU country, you complete one return and HM Customs takes care of making sure the right amount goes to the correct country.
But this is still a huge administrative burden on the solo business owner and entrepreneur, particularly if you are trading under the UK VAT threshold (currently £81k pa). It means you have to register for VAT and do extra administrative work (or pay someone to do it for you) even though by UK rules, you are exempt!
So, as this affects most of my clients and, as an advocate of keeping things simple, I did some investigations and discovered 3 ways you can still sell your knowledge through online courses and ebooks and avoid getting into trouble with the new law without the extra work and cost.
- Use a third party to manage your sales.
They include companies like Amazon and Clickbank as they then take the responsibility of collecting the right taxes and customer records which means you don’t have to as you’re not selling direct to the consumer. Of course, they take a fee from each sale, but that’s a small price to pay to have the burden and headache removed.
- Include some human intervention like a live class/webinar
If the e-course includes some live tutoring then it’s exempt from this new law. Obviously if the sale is coming from overseas (albeit Europe), it may be impractical to hold a class in a physical venue, but there’s nothing to stop you holding that class online over a webinar or teleseminar for example. The key is to include some live element that involves human interaction.
- Restrict your sales to the UK only!
Well, if you’re not already getting sales from outside the UK, then keep it that way! The new law may be trying to plug some loopholes that larger companies are exploiting (by taking advantage of lower VAT rates in other EU states), but what they have effectively (inadvertently) done is restrict trade throughout the EU. You can also delay registering for VAT MOSS until you do start making EU sales, although you should be aware that getting registered isn’t instant.
Are you thinking of launching online e-courses but stuck on the mechanics of how to actually create it? Then set up a free half hour consultation with me and I’ll help guide you through your first launch.
Disclaimer: The views expressed here are my own and to my best knowledge at the time of writing. They don’t and shouldn’t replace your own independent legal advice.