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Understanding the implications of January 2015 VAT changes for downloads on threshold for VAT registration

Understanding the implications of January 2015...

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I run a UK private limited company that produces software for direct sale online (no reseller). At present, we're not VAT-registered.

The HMRC guidance ( says:

You don't need to include supplies you make in other countries when calculating your VAT taxable turnover for registration purposes - so leave out of your calculation any goods and services you supply where the place of supply is another country rather than the UK.

My understanding is that software sold online is considered to be a service rather than goods. As such, I think I'm correct in saying that the place of supply for my software is the UK under current rules for B2C sales (and is the purchaser's country for B2B, with the caveats of "use and enjoyment" rules).

However, the forthcoming changes in January 2015 will change the B2C rules so that the place of supply is the consumer's location.

As far as the £81,000 threshold is concerned for VAT registration, my working assumption is that I'll actually end up with more headroom under the threshold as a result of these changes since sales that would once have counted as UK sales for VAT purposes no longer will.

I'm also assuming that distance selling rules only apply to goods and not services, so I won't need to register to pay VAT in other countries if I tip the balance over their respective distance selling thresholds as a result of these changes.

Are my understanding and my assumptions all correct? Are there any other impacts I've not thought of?

Thanks in advance!


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By david5541
28th Apr 2014 14:35

customer is the key

if your customer is in the eu and you are selling to them you are making a supply to an eu company

if your customer is outside the eu your sales what ever the location will not be withing the uk vat rules.


BUT if you are shipping product to a NON EU country or having product which you will sell on, imported from a non EU country THEN YOU SHOULD account for vat on an imported item as though you were selling it in the uk, at the point it is imported.


Services dont involve the transfer of goods/product at any airport/port  or dock by a shipping company/delivery company outside the eu. 

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