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Author Earnings and VAT

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

  1. alisonwhitecreative

    alisonwhitecreative New commenter

    I think the line of research you might need to do is as follows:

    If you earn 85 000+ from you TES shop (look at it as a business - does it bring you £85K+ a year?) then you need to register that as a business doing that much business. Then you'd pay VAT. If you are earning so much from your TES shop, well done! If not, you have two tax options, in simple terms, be a business and be the director - the business pays corporate tax - used to be 20% and you can pay yourself a director's salary but the tax on that money has already been paid by the business (more cheaply than personal income tax which is what, 20some %?). Get an accountant if you are earning on TES. Challenge them - if they can't save you more than you pay them, ask if you don't have to pay them. They will calculate things like the fact that you have to use electricity and heating to produce the resources you sell. And you have to buy pens and a computer and run a mobile phone. Tax Assist is national and set up for small businesses.

    If not, relax.

    Consider the other fee that TES takes off like an agent's commission - they have taken the pain out of selling your stuff. Of course, they are going to need to be registered to pay VAT on that, if you are earning £85k+, then they certainly are so of course they need to register and pay their VATs dues - which they do.

    I'm a real lay person but an accountant made my freelance work much more tax friendly so start there.
     
    Kazg1 likes this.
  2. alexfeakes

    alexfeakes New commenter

    I'd quite like to see the advice TES has received about this, because my reading of the relevant legislation and VAT guidance (https://www.gov.uk/government/publi...plies-made-by-or-through-agents-general-rules, https://www.gov.uk/government/publi...pplying-digital-services-to-private-consumers) leads me to different conclusions.

    Firstly, in the vanilla situation of (non-digital) supply of services, the services TES provide to sellers would ordinarily put them in the position of 'agent' to the seller (who is the 'principal' in the legislation), except that they have the authority to vary the price of the product (through temporary sales etc), which consequently puts them in the position of principal. If they did not have this authority, then they would just be an agent, and would just charge sellers VAT ont he royalty / commission.

    Secondly, the EU selling laws for digital services (not an EU Directive or law, but a UK regulation designed to give a level-playing field (https://www.gov.uk/government/publi...pplying-digital-services-to-private-consumers)) do apply... to sales outside of the UK but within the EU. So, notwithstanding any UK-US taxation agreements, sales to the US (and Australia etc) should be exports, which are zero-rated for VAT purposes and outside the scope of the EU selling regulation mentioned above, and unless the principal is VAT-registered, sales within the UK would not be VATable.

    Conclusions:
    1. Sales outside the EU should be zero-rated in all circumstance (bar any particular agreement between place of sale and purchase).
    2. If TES didn't have the authority to vary prices for eg sales events, then they would just be an agent, and therefore, unless the seller is VAT registered, UK sales would not be VATable.
    3. For sales to other EU member states TES would be a principal and required to charge VAT to the buyer.

    Questions for TES:
    1. I would quite like to see the advice TES have received on this
    2. TES could have structured their involvement to ensure they were always principals for UK sales - why haven't they done this?
    3. Why are sales taxes being deducted on non-EU sales?
    4. Why do different amounts of VAT seem to be charged on different UK sales?
     
  3. ResourcesandCourses

    ResourcesandCourses New commenter

    Thank you Alex, this is very interesting, let's see if this get's us anywhere. Thank for all your hard work. Cheers Karen
     
  4. alexfeakes

    alexfeakes New commenter

    Thanks Karen. I've just realised there is a typo in my 'questions for TES. No 2. It should read:

    TES could have structured their involvement to ensure they were always *agents* for UK sales (and therefore didn't need to charge VAT on the sale, unless the seller was VAT registered. Why haven't they done this?
     
    mrajlong and Kazg1 like this.
  5. alisonwhitecreative

    alisonwhitecreative New commenter

    Crikey - I won't be withdrawing money until there are answers!
     
  6. tesAuthorTeam

    tesAuthorTeam Administrator Staff Member TES Authors' forum host

    Hello all and sorry for the delay here -


    From our finance team:

    1. We are confident we are following the current rules and regulations. Please read our FAQs for further information.

    2. Tes act as principal on all transactions, as previously explained in the original response.

    3. We comply with all international sales, goods and services or other similar taxes as required – it is our responsibility as principal on all transactions.

    4. UK sales are at standard rate, the variation you see may be due to application of incentive credit by the buyer.


    We hope this info is helpful - please let us know if you have further questions.
     
  7. alexfeakes

    alexfeakes New commenter

    Thank you and your finance team for your reply. I hope you don't mind that I have some follow up questions.

    1 - I should hope you are confident that you are following the rules and regulations! However, it is quite often the case that you can structure your business in different ways all of which are quite legal, and my question is why TES seem to have structured the selling mechanism on their platform to maximise VAT revenue for HMRC, rather than income for the sellers (and TES).

    Re point 2 - As I mentioned above in a reply to another poster, there was a typo in my original post - in point 2 it should have said 'agent' not 'prinicipal'. The significance of this point is that you wouldn't then charge the buyer VAT on the sale, but only VAT to the seller for your services. Any responsibility to charge VAT would remain with the seller. As the VAT on your services would be a much smaller amount than the VAT on the sales price, the seller would in general receive a larger net amount (unless they are registered for VAT, which for the vast majority of your sellers would not be the case). I should be grateful if you could clarify this point.

    3 There is no VAT on sales outside the EU, though there exceptions (eg digital licence sales to US individuals). Is sufficient information being collected on sellers to determine whether the correct rate is being applied?

    4 Thank you - this makes sense.
     
    TenTors likes this.
  8. Areach

    Areach New commenter

    Hi all,
    Interesting read regarding VAT.
    I just found the following from the www.gov.uk website regarding the issue of VAT of educational resources. As it happens all educational resources for school pupils is zero rated, therefore exempt from VAT.
    In the light of this information TES must review their position regarding VAT on educational material especially for the Authors who have uploaded their books as an individual and are not running a VAT registered business.

    ---------------------------------------------------------------------------------------------------------------------------
    3.1 Books and booklets
    These normally consist of text or illustrations, bound in a cover stiffer than their pages. They may be printed in any language or characters (including Braille or shorthand), photocopied, typed or hand-written, so long as they are found in book or booklet form.

    Supplies of any of the following are zero-rated:
    • literary works
    • reference books
    • directories and catalogues
    • antique books
    • collections of letters or documents permanently bound in covers
    • loose-leaf books, manuals or instructions, whether complete with their binder or not
    • amendments to zero-rated loose-leaf books, even if issued separately
    School work books and other educational texts in question and answer format, are zero-rated because the spaces provided for the insertion of answers are incidental to the essential character of the book or booklet. The same applies to exam papers in question and answer format provided they qualify as books, booklets, brochures, pamphlets or leaflets.

    By the way...
    You must register for VAT with HM Revenue and Customs (HMRC) if your business’ VAT taxable turnover is more than £85,000.

    Below this income threshold even as business you do not need to register.
     
  9. thinkypublishing

    thinkypublishing Occasional commenter

    Printed books are zero VAT but I don't think this applies to digital books.
     
    nick_redshaw likes this.
  10. alexfeakes

    alexfeakes New commenter

    Yes, sadly that is correct. What we are selling are digital licences, which are covered by the digital services part of the VAT regulations.
     
    nick_redshaw and thinky like this.
  11. MissEHoney

    MissEHoney New commenter

    To negate the issue of VAT payment when it was introduced I put up my prices by VAT - e.g. where i had a £2.00 resource it is now at £2.40 (20%) so i added on the VAT myself so i would not see any difference on the royalties for that item. So maybe have an idea of the price you want to get the royalties on then add on 20% for the actual price you sell for?
     
    nick_redshaw likes this.
  12. EC_Resources

    EC_Resources Occasional commenter

    Pretty sure you can't claim back the VAT on this as Tes have paid it, not you.
     
  13. EC_Resources

    EC_Resources Occasional commenter

    Hmm. The transaction fees come off our side of the sale it seems (they must do or the Tes royalty on their side would have changed). That should surely mean we can claim back the 30p transaction fees in our tax returns and deductable expenses. That's what you do with Paypal fees. Surely it must be the same? Now just got to figure out how many sales this has been applied on :S
     
    nick_redshaw, MosaiK and mrajlong like this.
  14. MissEHoney

    MissEHoney New commenter

    If you are vat registered you can claim it back from tes but would then have to pay HMRC yourself but you can also wrote off VAT from business purchases as well.

    another question. what happens with transactions for vat in Australia? I've had an Australian buyer and had the tax taken off. surely tes doesn't have to pay tax in Aus if it's based in the uk?
     
  15. nick_redshaw

    nick_redshaw Occasional commenter

    I am VAT Exempt as a company and until my ecommerce branch reaches the threshold I don't have to charge VAT (so don't need to add this onto the customer) BUT cannot claim any VAT back so you take the hit on any company that you use for their services -i.e. TES. As commented by MissEHoney above if then registered for VAT you would then add this onto the price of your resource and then claim back any VAT paid on services - Very long winded but a cross we have to bare.......please note if you add it on you should then be paying it on your yearly returns....so probably just accept it until your at the threshold.
     
  16. myersale

    myersale New commenter

    A Silver tier author earns 70% royalty, not 75%... does TES not know the royalties of their own tiers?
     
  17. tesAuthorTeam

    tesAuthorTeam Administrator Staff Member TES Authors' forum host

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