The Wholesale Forums

[BlackBox]

Hi,

Any advice appreciated

I am confused, VAT is payable on Digital Products this I am now aware of.

But if I buy a digital product from someone then resell product.

Do I need to pay VAT on all sales or has this already been paid by first seller?

So if I buy for £1.00 and sell for £3.00 to make a profit do I need to pay VAT on £3.00?

Or is this payable once hitting VAT threshold?

[muttley]

If the product does not exist in a physical form.(e.g. a downloaded program) then no import VAT is payable, according to the HMCE Advisory service. However if it is offered on a CD then it is. But you do have to charge/pay sales VAT.

Regarding paying and charging VAT.

Your pay on purchase and then charge it on each sale. So

Your would pay VAT on £1.00 to the seller, if from the EU. (but can claim this back as Input VAT).

Then your would need to charge VAT on £3.00 when you sell, to the EU. (Pay the VAT man this as Output VAT.)

[BlackBox]

Hi,

So I pay the VAT man 0.35p ?

Seems a hassle?

[muttley]

Yep, per sale.

Although you pay him 52 / 53 pence with one hand. And then if applicable claim back 17 / 18 pence for each purchase.

so for every 100 sales you pay £52.50 and claim back £17.50 and then pay then the difference of £35.00.

But the total Turnover needs to be £56,000 or more before you have to apply. and if it is then this is just added to all the other areas.

[BlackBox]

Hi,

So if under £56K turnover you dont pay VAT man anything?

[Richard]

If your turnover is below £56k, you do not need to worry about registering for VAT. You may still pay VAT on your purchases - this depends on whether the seller is registered for VAT or not.

eBooks/software etc are eligible for VAT but do bear in mind that sales made to countries outside of the EU (such as the USA) are outside the scope of our VAT laws and therefore this turnover is not included in the figure above. What this means is that if you make sales of, say, £100,000 to the US but you only make UK/EU sales of £40,000, you do not need to register for VAT (even though your total sales are over the £56k mark).

Best thing to do if you are in any doubt is phone the Customs and Excise helpline - they are very good and will answer all your questions: 0845 010 9000

Cheers

Richard
TheTrader

[Stuart Morrison]

Excellent, informative and succinct post Richard.

[Martin]

Downloadable products are definitely subject to VAT. I checked this most carefully with C&E some time ago. So are any "books" unless they are solidly bound. In other words, if you sell a "book" which comprises a ring binder holding loose sheets, it's not a "book" in the eyes of C&E and so VAT is chargeable. Likewise "books" on CD or floppy, punched tape(!) or downloadable. Also software in any form is subject to VAT.

This presupposes that you are registered for VAT. If you aren't then you just charge what you charge.

I'm surprised by Richards comment about total income. My understanding is that as soon as your total income from any sources exceeds the limit, you should start to pay VAT to C&E. But I'm only an engineer!

Martin

[Richard]

<div class='quotetop'>QUOTE </div>

I'm surprised by Richards comment about total income. My understanding is that as soon as your total income from any sources exceeds the limit, you should start to pay VAT to C&E.[/b]

My comment above regarding sales to countries such as the US is definitely correct - I went through considerable discussions with my local VAT office to confirm it as much of my own turnover relates to sales to the US and therefore this was very relevant to me. I also ensured that I got it in writing from them

Cheers

Richard
TheTrader

[neilzinho]

Hi,
I've dug up this old topic as I'm going to launch a downloadable product soon and need to check if the points are still valid.
So, should I still not bother about VAT on my product if my sales (within the EU) are fewer than £56k per year? Thanks a lot for the help.