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Author Earnings and VAT

Discussion in 'TES Authors' Group' started by tesAuthorTeam, Jan 18, 2018.

  1. tesAuthorTeam

    tesAuthorTeam Administrator Staff Member TES Authors' forum host

    There have been some discussions lately on Tes forums regarding VAT. Our finance team have put the below together for Tes Authors to help provide some further detail. We hope you find it helpful.

    Below you will find an example on how your income as an author is calculated and the VAT considerations. Please also refer to the Tax and VAT FAQ here: https://www.tes.com/help/tax-and-vat-faq

    It’s important to be clear that any sale on Tes Resources, is actually two different transactions:

    1. Firstly, the customer purchase on Tes Resources Marketplace is a transaction between Tes and the buyer. All prices are VAT inclusive, and the VAT paid by buyer to Tes is accounted for by Tes and paid to HMRC. Tes acts as principal in this transaction, and this VAT is Tes’ liability to HMRC.


    2. There is then a second transaction, between Tes and the author. This is the royalty. Royalty is calculated on the purchase value after VAT has been deducted, and transaction fees applied if relevant. The net royalty is paid to the author. Where an author has accounting/tax submission requirement, the royalty is the income or revenue that authors should be recording, not the value of the customer purchase. If the author is VAT registered, VAT at UK standard rate 20% is applied within the royalty amount paid.

    As an example:

    · When TES makes a sale of £10 to an end customer, this would include £8.33 for the resource, and £1.67 VAT.

    · If the author is a 'Silver Tier' author, the royalty rate at 75% x 8.33 = £6.25 = author gross income

    o If author is VAT registered, then the £6.25 is broken down as £1.04 VAT due to HMRC from author and £5.21 net income

    o If author is not VAT registered, then author net income is £6.25

    If an author has registered or deregistered from VAT with HMRC, or has been set up as such incorrectly in our system, then please contact Customer Service via help@tes.com to raise a request for amendment by our support team.
     
  2. ResourcesandCourses

    ResourcesandCourses New commenter

    But the author is still actually paying the VAT out of the cost of their resource. So I still don't get it, sorry must be me, its a bit of a minefield this VAT business, it drives me nuts!
     
    MosaiK likes this.
  3. GalvaniseEDU

    GalvaniseEDU New commenter

    VAT has to be paid on both transactions. The one between you and TES, and on the one between you and the buyer.
     
  4. trappistic

    trappistic New commenter

    you can reclaim VAT on purchases used for your business https://www.gov.uk/reclaim-vat
     
  5. ResourcesandCourses

    ResourcesandCourses New commenter

    Great, thanks
     
  6. jubilee

    jubilee Star commenter

    No, VAT is charged on the transaction between the buyer and TES. TES then forward an amount to the creator of the resource. That amount is treated as VAT inclusive if the seller of the resource is VAT registered (so the amount in the example has £1-04 to be recorded in their VAT account). If not VAT registered, the seller only has apotential tax liability on the sume paid to them from TES, and no VAT is applicable.
     
  7. ResourcesandCourses

    ResourcesandCourses New commenter

    Thanks for this, so just to make sure I’m reading this correctly. I am not VAT registered, so I should not be paying this tax, is that right? If my understanding is corect is there anything I can do about it. Thanks so much.
     
  8. ResourcesandCourses

    ResourcesandCourses New commenter

    Hi Jubilee, I’ve re-read the original posting from TES and have now emailed them to let them know that I am not vat registered. Thank you for posting as if you hadn’t I would not have revisited this post and realised that I had not digested it properly in the first place. Thank you so much.
     
  9. ResourcesandCourses

    ResourcesandCourses New commenter

    Received a reply... so basically it doesn’t matter that I’m not vat rgistered I still have to have it deducted out of the cost of the resource and so does everyone else. Still doesn’t seem right to me...

    ‘By Law, we are required to deduct VAT tax from all sales. This is applicable to all authors who sell on the Tes site, regardless of how much you earn.

    VAT on each transaction (where applicable) is deducted from the purchase price, then the royalty rate is calculated thereafter. You can see a full breakdown for each sale by clicking on any of the sales entries within the ‘Sales’ section of your author dashboard.

    The percentage of VAT charged depends on the location of the individual buying the resource (their VAT jurisdiction). You can see the buyer country within the sales breakdown as detailed above.’
     
  10. jubilee

    jubilee Star commenter

    Vat has to be charged by TES because they are selling the resource on your behalf and TES is VAT registered.

    The way to look at it is not that you are losing that VAT amount but that TES is adding it on to the price to the buyer. TES then pass that VAT onto the treasury.

    Your transaction is with TES but you are the service provider in that case and don't charge VAT. TES thus passes on the amount they have retained (after the VAT and any fee due to them) and you get the 'full' amount.

    Any resource provider who is VAT registered, will have that 'full sum' split into a resource fee and VAT, both charged to TES, and the service provider will settle up with the VAT people after deducting any VAT that they paid out on business supplies and services.

    As a non-VAT registered supplier, you will get more of the sale price of your resource than someone who is VAT registered.Just regard your gross sum from TES as your resource selling price, not the price that TES received from the buyer.
     
    Kazg1 likes this.
  11. mrajlong

    mrajlong Established commenter

    In the EU all digital downloads are eligible to pay the VAT of that country. Nothing any of us can do about it except hope that Brexit changes that for the UK. Fat chance!

    It's nothing to do with being VAT registered or that TES is the platform. This would have to be paid if you ran your own website too, even if you weren't VAT registered. A simple search for tax laws and digital downloads will take you to the .gov site that explains this...
     
  12. jubilee

    jubilee Star commenter

    The end user downloads from TES, so the transaction has VAT levied. The VAT is paid by the end user, not by the creator of the resource. Arguably, if there were no VAT levied, the end user price would be lower.
    TES simply acts as the retailer and their payment to the originator is the same whether or not the person is VAT registered. If they are, the notional 'invoice' that TES pays outlines the VAT-inclusive price.
     
  13. thinky

    thinky Occasional commenter

    Interesting point. Arguably VAT should therefore be added to the cost for those customers expected to pay it (instead of effectively being deducted from a seller's royalty).

    The situation for small independent sellers via their own platforms is a stupid situation. The only way round it is to reject sales to the EU.
     
  14. mrajlong

    mrajlong Established commenter

    I suppose this means we need to price our resources to allow for the added VAT which is effectively discounted from our royalties. When I first started on here this didn't happen. It all changed when the EU law came in to operation. However, Tes did change the royalty levels so that Gold authors still made a little bit more than before the VAT was deducted...so can't complain too much I suppose!

    It does P me off that the gov are getting the VAT and then tax paid on my sales revenue as well...
     
    Kazg1 likes this.
  15. ResourcesandCourses

    ResourcesandCourses New commenter

    Thanks
     
  16. ResourcesandCourses

    ResourcesandCourses New commenter

    Etsy charge the customers VAT, this does not come out of the seller commission. I agree its ludicrous that we are expected to pay it as authors. But we can't just start putting our prices up that will put customers off.
     
  17. ResourcesandCourses

    ResourcesandCourses New commenter

    Thanks everyone for your input and for the clarification, much appreciated.
     
  18. jubilee

    jubilee Star commenter

    The government are not getting all the VAT charged to the end user. TES charge the VAT but they also pay VAT on the various aspects of their own business (office supplies, their own downloads, building works etc) and as a VAT registered business they can claim back that VAT. All VAT registered businesses deduct the VAT that they pay from the VAT that they charge, and they pass any surplus onto the relevant government agency.
     
    extra golden-time, mrajlong and Kazg1 like this.
  19. haltest

    haltest New commenter

    What happens is a person is resident overseas (for tax purposes), do they will have to pay VAT?
     
  20. ResourcesandCourses

    ResourcesandCourses New commenter

    It would seem so. It seems be compulsory to all authors. Rubbish isn’t it. I can understand as the other sites like TpT and TN don’t do this. But you could send an email like I did and just check for yourself. All the best.
     

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