VAT treatment for OnlyFans content provider v2

VAT treatment for OnlyFans content provider v2

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[Editor’s note: The original post was removed after several AccountingWEB members had offered their opinions. Based on their summaries, we have attempted to summarise the outline issues raised and moderated some of the comments that remain so that the essence of the discussion can be preserved.]

The original question concerned the VAT treatment of payments to content creators via the OnlyFans platform and whether the website owner needed to account for VAT on the entirety of the fees paid by individual subsribers.

The poster reportedly asserted that subscribers would pay the platform to access content individual creators supplied to the platform, and that the platform would pay them for that supply, less a fee for handling the transaction.

The position taken was that by acting as an agent for the creator, the platform would only need to account for VAT on the agent’s 20% commission, not the full subscription fee.

They also appear to have asked for clarification on the whether the VAT MOSS regime would apply to digital services of this kind.

Replies (60)

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chips_at_mattersey
By Les Howard
22nd Aug 2019 12:21

I am unsure why you are asking your questions, but will make some comments.
Where the person operating the website purports to act as Agent, that depends on the formal contract and the actual day-to-day operation. I am assuming your are the Agent. As you say, VATMOSS doesn’t not apply to B2B supplies, so normal VAT rules apply. You charge UK VAT to UK based clients, and Reverse Charge to non-UK clients.
20% VAT is added or included depending on the contract.
If HMRC take a particular view, that is merely opinion and is open to challenge. As a practitioner, I have to say that they are not always correct!

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By amateurexpert
13th Apr 2020 15:34

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By Accountant A
22nd Aug 2019 01:21

amateurexpert wrote:

I look forward to your thoughts!

If the matter is so fundamentally critical to the commerciality of the business, you would be very badly advised to wing it on the basis of free "advice".

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By amateurexpert
13th Apr 2020 15:34

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By paul.benny
22nd Aug 2019 09:19

I think you are misinterpreting the above guidance.

As understand your scenario
- I pay you a subscription to view content
- you remit that to the creator, less a fee

On that basis, you should charge me VAT on my subscription. If I am in another EU member state, you should account for the output tax under VAT MOSS, unless I am a VAT registered business.

VAT treatment of payment to the content creator depends on the exact contractual arrangement. Are you purchasing/licensing content? (in which case, they should be charging you VAT). Or are you truly providing a platform like amazon/eBay?

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By amateurexpert
13th Apr 2020 15:35

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By paul.benny
22nd Aug 2019 12:13

A purchase from a third party seller via amazon is a discrete transaction and there is a 1:1 relationship between customer and supplier. It's not too difficult to argue that that amazon are a platform and should not be obliged to account for VAT on the full selling price. (That said, there are proposals to put the VAT obligations onto amazon, eBay, et al)

A subscription to a website with allowing access to content from multiple providers doesn't have that 1:1 relationship. I think it's very difficult to support the idea that the website owner should not account for VAT on the entirety of the subscription.

If the income is >£85,000, then prima facie, the websites should be accounting for VAT, whether the customers are business or consumer.

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By amateurexpert
13th Apr 2020 15:37

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By paul.benny
23rd Aug 2019 14:17

If my purchase only allows me to view content from one provider, it may indeed be easier to support a contention that the website is acting as agent.

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regardless of turnover a B2B supply is not accountable for VAT

I don't know where you get that idea. Cross border B2B transactions may be zero-rated but both parties have VAT accounting and reporting obligations

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...the website wouldn't have to charge it to the purchaser of content?

As already discussed, it's moot whether VAT is chargeable on the full price. Even if accepting the position that the website is an agent, if the content provider is above the registration threshold, they must account for VAT on their income.

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By Tax Dragon
22nd Aug 2019 06:02

Way too many words for me to read at this time of day, but if you follow this forum you'll know that not reading the question never stops me answering!

VAT falls primarily on customers. The few words I did read make it seem as if you think it's a tax on suppliers.

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By lionofludesch
28th Aug 2019 08:38

Tax Dragon wrote:

VAT falls primarily on customers.

In theory. But that depends on whether, in practice, the supplier can increase his charges in the market. It can, in effect, be a tax which falls wholly or partly on the supplier.

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chips_at_mattersey
By Les Howard
22nd Aug 2019 10:56

Another comment is that major websites operated by large companies will instruct lawyers to draft Ts & Cs to protect their position with respect to VAT. No private customer will ask for the Ts & Cs to be amended for their benefit.
This is in contrast with the comments you obtained (from HMRC) which insist that the digital platform must not set the conditions. As far as I am aware, the major digital platforms set the conditions for use which include the agency issue.

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By amateurexpert
13th Apr 2020 15:38

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chips_at_mattersey
By Les Howard
23rd Aug 2019 13:51

On the narrow point that the creator is in business: for VAT purposes the definition of business is very broad. The fact that the creator is earning income from the website is sufficient to establish that. The B2B test is therefore met.
Liability to VAT registration is a separate matter of course.

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By Duggimon
22nd Aug 2019 15:04

Your points 1 and 2 are mutually exclusive. You state in 1 that the content creators are supplying the platform and the platform is paying them for that supply. Point 2 states the platform acts as an agent. It's one or the other and the VAT position depends on which it is.

Do the users subscribe to the platform and pay subscriptions to the platform, or do they subscribe to the creators and pay subscriptions separately for each creator to whom they subscribe?

The VAT position is further complicated by how the platform is used. My wife has a shop on Etsy, she sells a mixture of physical and digital items. She is not VAT registered. The physical items carry no VAT, the digital items do, because Etsy, the platform, is the supplier in the digital transaction as they are the medium through which the product is transferred.

The VAT position depends on some things you are a bit woolly on and other things you've made no reference to. What are people selling on this platform, how is it delivered? What is the agreement between the platform and the creators? Between the platform and the users?

You're jumping ahead to B2B/VAT MOSS considerations when you're yet to establish who is supplying what to whom, which is the basis of all VAT rules.

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By ConfusedTaxAccountant
15th Feb 2020 19:17

I know this is old but struggling to find out more info.

On your Etsy point, would your wife be able to reclaim VAT on expenses relating to the Etsy business? If Etsy are the suppliers to the customers, are Etsy sellers supplying Etsy directly? Apologies for my lack of VAT knowledge.

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By paul.benny
23rd Aug 2019 14:26

@OP What are you trying to determine in this thread?
- Is this trying to understand the VAT position of "adult" sites (we are talking about that kind of content here, aren’t we?) for your own general interest
- Are you trying to get advice for your ‘friend’s’ business while pretending it's a general discussion.
- Are you trying to expose a gap where there is widespread VAT evasion?

There are EU proposals to address the last – see https://www.accountingweb.co.uk/tax/business-tax/france-steps-up-vat-fra... . That article doesn’t mention digital services, but you can be sure that HMRC will be seek to bring them into scope.

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By amateurexpert
13th Apr 2020 15:39

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By paul.benny
23rd Aug 2019 20:11

amateurexpert wrote:

I'm curious because I do actually know a friend who's concerned they may be liable for any VAT due...

If your friend is concerned about potential VAT liability , they need to get proper advice from an accountant with appropriate expertise, rather than relying on an amateur expert.

Quote:
You seem to have an in depth knowledge in this field

I don't. I'm professionally qualified with sufficient working experience of VAT to be able to get my head around the VAT guides. Mr Les Howard, who has posted here, is far more expert than me

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..so presuming they are operating correctly as an agent which seems to be the consensus here....

I don't see any consensus about anything but the VAT rules and it's a big presumption that "they" (whoever they are) are operating within the VAT regulations.

[quote].is their supply to the 'agent' subject to VAT?/quote]

Err... the principal doesn't supply anything to an agent. An agent supplies their services to the principal.

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By amateurexpert
13th Apr 2020 15:45

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By paul.benny
24th Aug 2019 08:34

If your friend has an accountant, she would be best advised to rely on the accountant rather than trying to get a second opinion from someone without relevant expertise. [moderated]

Basic VAT is reasonably straightforward. Supply of digital services via an intermediary is two sorts of complication. If it's cross-border as implied by references to a €10k threshold, the complications are multiplied. Trying to grapple with that without a reasonable amount of experience is akin to trying perform surgery when you've only read medical text books.

As for principal and agent. That's reasonably basic contract law: think of an estate agent, if that's easier to get your head round. You, the owner of the house instruct the agent to sell it on your behalf. You are the principal in that transaction and are solely responsible for everything about the house. The agent is never the owner, just your representative. They are supplying you with their agency services.

In an agent-principal relationship,VAT status of the principal is largely irrelevant. The agent should always be charging VAT on their services, as does the estate agent when selling your house.

The €10k threshold refers to cross-border supplies of digital services into the UK. You've not said where your friend is based. As I've said, cross border supply of digital services is complex for VAT purposes. Without considerably more facts than are presented here, I wouldn't like to comment definitively on the situation. And then we're getting into advice that would be chargeable.

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By amateurexpert
13th Apr 2020 15:46

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By paul.benny
24th Aug 2019 17:28

There are so many continuing misunderstandings in your posts that I've lost the will to try to explain.

Instead, let me answer the question I think you want answering, namely, does your UK adult entertainment friend have potential VAT liability?

If her income is more than £85,000, she should be registered for VAT and should account for VAT on her income. It income is less than that, there is no obligation to register in the UK.

If she is below the UK threshold but has significant income** from digital services arising from individual EU member states, it's *possible* that she should be registering in those particular countries. I've never encountered that rather narrow scenario, so I can't comment definitively.

(** >€10,000 per country, based on the equivalent UK threshold)

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By amateurexpert
13th Apr 2020 15:46

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By Tax Dragon
24th Aug 2019 22:00

Even more words now and I can't pretend to have read that many.

This is no doubt answered above but... heck. So... is your friend supplying or buying digital services? I doubt it's both.

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By amateurexpert
13th Apr 2020 15:46

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By Tax Dragon
25th Aug 2019 22:38

Great effort matching my length. I appreciate that.

The point of my question was to check that your friend really is selling digital services. I believe that the 'creative' part of 'media' can qualify as such - but only if it's (for) broadcast. Somewhere along the line I've got it into my head that your friend is not producing stuff for broadcast; rather, that she provides the skype-age equivalent of telephone sex.

If so, I suspect the whole premise of your questions may be misconceived (never mind the other misunderstandings I think there may be).

Please appreciate that I am no expert on VAT; nor do I know how the industry in question works. It's not sounding like you know that much either - at least, about VAT. I suggest your friend pays for advice.... and does so, like, yesterday.

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By amateurexpert
13th Apr 2020 15:46

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By Tax Dragon
26th Aug 2019 14:24

Using digital media does not equate to supplying digital services for VAT. As far as I know.

Anyway, whatever the rights and wrongs of any views expressed in this thread, the long and short of it is that anyone with a business turning over sums in excess of the thresholds must consider VAT. It seems to me that your friend should register, simple as.

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By Tax Dragon
24th Aug 2019 22:50

Sorry, there was a second question. Your concern is, presumably, whether your friend should be charging VAT on her services. Why would that not be the case?

Again, that must have been asked already. Sorry (again) for not engaging with what has been said. My guess is you haven't found your answers or this thread would have died by now. If you could respond in posts no longer than mine (and I'm stretching this one unnecessarily to make that easier)...

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By amateurexpert
13th Apr 2020 15:47

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By paul.benny
25th Aug 2019 19:40

A little knowledge can be a dangerous thing. You've probably frightened your friend into thinking that she has some huge potential tax liability. As I have said before, you're like someone trying to carry out complex surgery having only previously read about medicine in text books.

VAT MOSS is a scheme for suppliers of digital services to consumers on other EU member states to account for the foreign VAT that is due without needing to register in each member state.

If your friend is VAT registered in the UK, she should be using VAT MOSS to account for the VAT due in other EU member states.

If she's not VAT registered in the UK, she could have a theoretical liability (as already noted).

[moderated]

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By amateurexpert
13th Apr 2020 15:47

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By Tax Dragon
25th Aug 2019 22:49

I suspect Paul knows more than me about VAT.

I'm not bigging him up - that's a low bar.

I can believe that the platform is providing digital services. To your friend, for one. What has that to do with your friend's obligation to charge VAT on her services?

And are you sure she's selling to the platform, rather than simply using it?

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By amateurexpert
13th Apr 2020 15:47

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By paul.benny
27th Aug 2019 09:25

amateurexpert wrote:
Platform is acting as an agent so she is selling to them.

No, no, no.
You’re still fundamentally misunderstanding the roles of agent and principal.

When you sell your house, you don’t supply your house to the estate agent. The estate agent supplies agency services to you.

Likewise, you friend is not supplying anything to the platform. (How many times do I have to repeat this?)
The platform are supplying hosting, marketing and payment services, on which they must charge VAT to content creators.

Quote:
Her supply to the platform is classed as a B2B so she is also obliged to add VAT as she is also 'supplying' digital services?

Again - she supplies digital services to consumers – not to the platform.

You’ve (finally) said that your friend is VAT registered, so yes, if she has significant revenue from other EU member states, she may need to account for non-UK VAT using VATMOSS.

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By Tax Dragon
27th Aug 2019 13:27

paul.benny wrote:

You’ve (finally) said that your friend is VAT registered...

Thanks Paul. Somehow I'd missed that nugget of information. But then, I have glossed over vast tracts of this thread.

paul.benny wrote:

so yes, if she has significant revenue from other EU member states, she may need to account for non-UK VAT using VATMOSS.

Paul, on your points about the platform acting as agent, you should probably read what HMRC says about platforms. There is more to what the OP says than you give credit for.

Also, if the live webinar comparison I make below is fair (having glossed over vast tracts of this thread I can't say for certain, but the OP hasn't gainsaid), would VATMOSS be relevant?

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By paul.benny
27th Aug 2019 14:21

I assume you’re referring to the guidance here:
https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...

I agree that “live webinar” is a good comparison – which, according to the definitions, is not an e-service, and therefore the platform provisions in that guidance don’t apply.

Would VAT MOSS be relevant? Yes. I’ve suggested that the threshold is €10,000 per member state but on re-reading, I think it may be €10,000 across all. We have a slight anomaly in that a service provider may have to account for VAT on their EU sales (through VAT MOSS) while still below the UK registration threshold.

As the lady in question is VAT registered, it’s likely be question of submitting a correction to prior returns and ‘converting’ some of her UK VAT to other-member-state VAT.

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By Tax Dragon
27th Aug 2019 14:32

Not an e-service.

That's how I see it.

So... isn't place of supply somewhere near a webcam in the UK? What am I missing?

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By paul.benny
27th Aug 2019 15:04

VAT 741a para 14 (paraphrased) - defines place of supply as UK if income is <€10,000

And from the notice about digital supplies, over €10,000, place of supply is where the customer is located.

Even though it's not an e-service, it's still a digital service.

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By Tax Dragon
27th Aug 2019 15:28

paul.benny wrote:

Even though it's not an e-service, it's still a digital service.

Aha. Thank you. See I knew you knew more than me! :-)

Maybe now I can get something other than pure frustration out of this thread... and I'll owe you one.

I thought "Defining digital services" then listed out "Radio and television broadcasting services" (N/A here); "Telecommunications services" (N/A) and "Electronically supplied services" - and we've just agreed that's N/A too.

So I thought... not an e-service and not a digital service.

So, same question... what am I missing?

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By paul.benny
27th Aug 2019 16:02

I see the difficulty.

What we're both missing is that the guidance doesn't explicitly provide for this kind of service.

It's clearly stated that live webinars are not e-services. I would argue that they're caught by the broadcasting and telecoms definitions - "broadcasting services include..."etc. As such they *are* digital services.

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By Tax Dragon
27th Aug 2019 16:23

I agree that it's not listed. But from the guidance I think the test is that there has to be 'content'. Something that anyone can look at, either because it's broadcast or because they can download it.

Despite the OP of this thread having gone on endlessly about the "creator", nothing is created. If nothing is created, if there is no 'content', then there is no digital service. IMHO.

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By paul.benny
27th Aug 2019 16:40

Maybe we have allowed ourselves to be directed into that particular rabbit hole. If there is indeed no digital service, it's just a regular B2C service and the place of supply follows the general rule that supply takes place wherever the supplier is located - ie in the UK. And consequently everything is subject to standard rate UK VAT.

(you're too kind, btw, saying I know more about VAT than you. You must be confusing me with Mr Howard)

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By Tax Dragon
27th Aug 2019 17:48

paul.benny wrote:

If there is indeed no digital service, it's just a regular B2C service...

I agree. Not only is VATMOSS a complete distraction. So too is any B2B "we're supplying the platform" argument.

Again, if there is no content, what is being supplied to the platform? Nothing. Just as I don't supply my telephone "platform" with content when I speak with a client. (It's not even a matter of agency - the phone platform is not my agent. Although... if I buy the additional service of the phone company timing my calls and automatically billing my clients on my behalf for my time, then I can see that an agent relationship does arise. But that's still me buying services from [not supplying] the company... ah, but you've explained that aspect already.)

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By amateurexpert
13th Apr 2020 15:50

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By paul.benny
28th Aug 2019 07:13

To repeat: The model is not supplying the platform. With anything.

If it is truly an agent-principal relationship, the model/creator, whatever you want to call her, is making B2C supplies. She must account VAT on the full price charged to the punter.

The platform should charge VAT to the model on their agency/hosting/payment admin services provided to her.

As for the question of is it a digital service or merely a service: The general rule for B2C services is that they are supplied where the supplier belongs; this rule is modified for digital services above the €10,000 threshold.

If the platform/agent does not and will not provide any information to allow the models to identify the location of their customers, it's reasonable to work on the basis that all are in the UK. It's well beyond my experience to know whether HMRC will buy this but given that it is the most assumption most favourable to them...

If you want more advice, contact me by PM and I'm sure we can arrange something. For a fee. Tax Dragon may also be willing to advise. Otherwise, it's time to bring this thread to an end.

[moderated]

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By amateurexpert
13th Apr 2020 15:50

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By paul.benny
27th Aug 2019 14:29

The guidance previously referenced discusses how to determine the location of the customer. The platform is likely to be collecting sufficient information, even if they are not forwarding it to the content providers.

https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services...

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By Tax Dragon
27th Aug 2019 09:51

I would suggest that the description (in the VAT Rules for Supplies of Digital Services doc) closest to the service in question is "live webinar".

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