VAT on mobile phone applications

Posted by jimmypritch PM | on Thu, 04/02/2010 - 17:38 2728 9 comments | report

I have a client that has developed a mobile phone application and is selling it through Android (owned by google) so every 2-3 days he will get a receipt from google checkout for say £180 being the sales less their commission.

Client is VAT registered in UK but I cannot seem to find anybody who knows the VAT status of his income? HMRC national advice helpline have told me that I need to work out the location of everybody that has purchased the application but as it is on sale worldwide and being downloaded on average 150 times a week this is really not practical - and hopefully not correct.

Has anybody else got experience of this scenario?

Comments

What's the problem?

petersaxton | Thu, 04/02/2010 - 18:34 | Permalink

Why can't you look at the locations from the database of customers?

..

jimmypritch | Thu, 04/02/2010 - 18:38 | Permalink

Is this really the correct way of doing things?

I just think of the developers succeeding with the iPhone that get maybe 1,000,000 downloads and cannot believe that they itemise out each £2 depending on where the customer is located that bought. Surely it would be far easier for apple / google to be ascertaining this information at the point of sale and then raising the necessary self-bill invoice to the customer.

Google are liable?

alan.falcondale | Fri, 05/02/2010 - 11:38 | Permalink

Is the responsibility not with Google? If the guy is marketing and retailing the goods himself then he would be in receipt of that information, but the intermediary of google who is vending the app is where the VAT deal is struck?

Google an agent

petersaxton | Fri, 05/02/2010 - 12:39 | Permalink

Google would be an agent. It's up to the seller to ensure the agent keeps the records. Given the scale of the likely VAT nationwide I would have thought HMRC would have leant on Google by now.

The rules are the same as for anything else

jonbryce | Thu, 11/02/2010 - 10:35 | Permalink

Either he is selling the app to Google, who in turn sell it on to other customers, or he is selling it directly to end users with Google acting as an agent.

If he sells to a customer who is based outside the EU, there is no VAT.

If he sells to a customer in an EU country other than the UK who supplies a VAT number, he does not charge VAT. It is subject to the reverse charge rules.

If he sells to a customer in the UK, or a customer in the EU who does not supply a VAT number, he charges 17.5% VAT.

iTunes works the same way

nigel | Thu, 11/02/2010 - 12:28 | Permalink

I have a company that sells music on iTunes and the other main download sites worldwide. We do this via a digital distribution company in New York who take a percentage of the sales and pay us the difference. I need to check our contract to see if they are acting as our agents or as resellers, but I think it's the latter. The actual download sites like Apple's iTunes certainly sell as principals, not as our agent, so they deal with any VAT on the actual sale.

So the question is, who is our customer?

Most downloaders of our music will probably be UK or EU based but I get no itemised sales reports, so I have no idea where the customers are and the only practical solution is to treat all the income as zero-rated income from outside the EU (i.e from USA), treating the distribution company that ultimately pays us (in US dollars) as our customer.

Could have problems

petersaxton | Thu, 11/02/2010 - 13:56 | Permalink

"treating the distribution company that ultimately pays us (in US dollars) as our customer."

From what you have said that seems the most practical but you may come unstuck if HMRC argue differently.

VAT on mobile phone applications

Anonymous | Thu, 11/02/2010 - 14:31 | Permalink

This looks like it would come under the place of supply of services rules which, if they are being sold to traders in other countries, will mean that you will have to identify the country.

It is less of a problem if being sold to non-traders.

HMRC got it wrong?

Rupert21 | Thu, 11/02/2010 - 14:37 | Permalink

Hi,

I think it is still the UK...for the moment.

I read something on this site www.tmf-vat.com/european-vat which implies (perhaps??) HMRC were thinking of regular supplies and not electonric supplies. For the latter, the place of supply rules do not change till 2015. It is still where the supplier is located - hence AOL etc being located in low-VAT Luxembourg. If HMRC can't get this right, what hope have the rest of us?