Business Law & Compliance

VAT changes to impact B2C companies

2 min read

08 August 2014

From 1 January 2015, however, all businesses will need to account for, and pay VAT to, the country where the customer is located.

These changes will affect all UK businesses making B2C sales to customers in other EU states even if they are not registered for UK VAT.

For example, a UK business selling an app to an individual in Sweden will charge VAT at Sweden’s standard rate of 25 per cent, while the same app sold to someone in Cyprus will be subject to a standard VAT rate of 19 per cent.

However, complications arise for those selling through Android/Google Play and also in-app purchases. It seems that they lack Apple’s current agreement of acting as your agent. In effect, a UK business sell to Apple SARL in Luxembourg and Apple sell on to the EU customer.

For UK businesses selling e-services on Android/Google Play, the agreement is structured in a way that the business sells directly to the EU customer. It will therefore be the businesses responsibility to account for, and collect, the correct amount of VAT based on each customer’s location and pay this over to the local tax authorities.

With 28 countries in the EU and 30 different rates of VAT, the scope of confusion is obvious. UK businesses with significant EU sales should take this opportunity to review pricing structures. 

Either way, UK businesses will need to review their checkout process to identify exactly where the customer is located. HMRC have indicated that they would expect businesses to use information such as billing address or IP address to confirm where the individual is located or where the mobile or tablet devices is registered. The next step is to apply and collect the appropriate rate of VAT.

Written by Justin Randall of accountants Jeffreys Henry LLP.