UK VAT and B2B with the USA

Just in case anyone knows the answer, (as its very hard to locate a definite one online):
Most countries in the world charge VAT
Each country has a threshold for sales, and if you sell more than ‘X’, you must register for VAT
Im in the UK, but everything I sell is ‘to’ FastSpring in the USA as a B2B

I believe that these sales are wholesale sales, and that because they are to the USA, they are VAT exempt.
And if that is so, they don’t count towards ‘taxable turnover’.
So I couldn’t actually reach or exceed the taxable turnover that requires VAT registration in the UK.
Does anyone know for sure if that is the case?

So essentially you “sell” your product to fastspring and they handle all the taxes (of the buyers)

Yes. But I need to know about the need to register for VAT in the UK.

One possibility is that :
We will not need to register because the sales are VAT exempt.
Another is that
We cannot register, because none of the sales attract VAT
Another is that
We must register, but submit VAT returns that say ’ we owe you nothing’

What I cannot find out so far, is which of these 3 conditions is true.

Anything you sell to the US cannot be subject to VAT.

Only sales you do in UK count against the threshold.

I highly recommend small companies to use service of those resellers like FastSpring, ShareIt or others.

No trouble with the 50+ different countries charging vat.

Hi Jeff,

If your threshold of sales is either approaching or exceeding “X” for your country, regardless of how your sales are brokered, I would highly recommend you hire yourself an accountant and have them figure this out.

I’ve spent most of my software career as an independent “self-employed” contractor and having a regular accountant I can refer to for questions like this has more than paid for itself. The last thing you want is the Government coming back to you a year or two down the road telling you, you owe them money (with penalties).

We don’t have VAT here in Canada, but we do have a Goods and Services Tax GST. And for years my main customers were in the US. Was I supposed to be charging them GST on my consulting/programming “software” services? My accountant did the digging, talked to the Revenue agency and got a ruling based on several different interpretations.

Maybe VAT is a lot more straight forward than our GST, but in my case the answer did depend on factors like my industry (software development) and whether said “tangible” product was being exported back into Canada. Well, I was building intranet systems used by employees of a Global company with offices in 70+ countries, so some aspect was being utilized in Canada. There was no simple answer.

Regardless of what you may read online, your tax collector will have the final say. Make sure you (and your accountant) know the facts for your circumstances.

I hope that helps.

[quote=475307:@Christian Schmitz]I highly recommend small companies to use service of those resellers like FastSpring, ShareIt or others.

No trouble with the 50+ different countries charging vat.[/quote]
I guess some countries are luckier than others, but still…

Would you believe I have asked my accountant, a different local accountant, plus an online VAT specialist and not one of them has actually replied after I asked the question.
Even to say ’ I dont know’
It’s been like asking a plumber to fix a dripping tap - as soon as you explain the job they just disappear. :slight_smile:

As Michel says, ‘Only sales you do in UK count against the threshold.’ seems to be accurate, and matrches my understanding.
But I cant get a definitive answer about which of the 3 cases is true…
Must/Should/Cannot register?

seems that this is yet another case of “until it goes to court to get clarified it remains unclear”
that seems to be the way so many laws are written

[quote=475312:@Jeff Tullin]Would you believe I have asked my accountant, a different local accountant, plus an online VAT specialist and not one of them has actually replied after I asked the question.
Even to say ’ I dont know’[/quote]
Dealing with taxes is frustrating, but that’s just mind boggling.

What about asking a colleague in the UK? Someone long established, same employment/independent status as you, does sales via FastSpring and has gone through at least one audit?

That’s what I did, to help me get started on knowing the right questions to ask.

Was hoping to find one here… :slight_smile:

You might want to see if there are Threaties between the UK and the US you should be able to look them up.
If not, your probably want to ask Fastspring, as they have knowledge about their markets and customers.


I can only speak for myself, but I’m reluctant to disclose the specifics of my hard-fought GST ruling in a public forum, in the off-chance that someone will misinterpret those results and make business decisions based on that - only to be stung later because the circumstances were not “exactly” the same. Tax rulings are funny that way.

Here’s hoping someone may contact you privately, with some starting “advice”. Even then, pass that “advice” by an accountant to get some sort of confirmation or at least a head nodding. Good luck!

they say ‘we handle all the VAT, you don’t need to worry about it’.

Which is also not an answer… :slight_smile:

It seems Fastspring acts as an app store, and is technically the seller.

As such, they must register for VAT in countries they sell in, and remit regularly. So indeed, they take care of it.

In accordance with EU directive all sales out of the EU including the UK, for the moment, are subject to VAT with very few exceptions. Most countries apply a zero rate on such sales and so for the most part you can ignore it. Most of what FastSpring say on their website works from practical point of view, but they can’t assume your responsibility to comply with local VAT laws even if it is only to seek an exemption or submit returns with zero sales.

In the case of the UK the definition of VATable revenue includes zero rated sales i.e. sales to the US etc… when determining if registration is required. HMS Revenue practice is to exempt small businesses with little or no local sales and few VATable inputs.

Best to consult your accountant or tax advisor on this since they will know your business and more importantly the local Revenue practice better than some random body on the internet.

When we sell plugins (software) through ShareIt or Fastspring to the UK, they charge 20% VAT on the sales.

Within the EU if the buyer has a VAT ID, it gets zero rated, but otherwise the local VAT rate is added.

For Swiss, they add the Swiss VAT rate, 7.7%.

And for a sale to Canada, it’s 10% GST.

For US it’S more complicated as it depends on the state and there are a lot of different rules for those.

I am happy to not care much about it.
And my accountant does the VAT stuff for Germany.

We don’t need to know or care what FastSpring does. They are a retailer and they deal with their own Tax.
They charge end users according to their rules.

It’s all about whether you have direct sales to end users.
MBS does (I guess… not 100% sure about ShareIT - is that one of Digital Rivers many hats?)

Paypal button would be a direct sales.
We don’t sell direct.

I think the answer to ‘does anyone know for sure?’ is ‘no’. :slight_smile:

We stopped selling directly to EU customers without a VAT ID as I don’t want to handle VAT for the other 26 countries myself.

And I have no interest to sign up with HMRS in UK, so UK customers have to go through Share-It.
(till end of year we may accept VAT IDs for UK)

In case it helps anyone else in the UK in the future:

Several non committal conversations with HMRC later, I did get one person to commit.
The answer is : if you ONLY sell to FastSpring, you don’t need to register for VAT.

(You apparently CAN if you wish, to try and reclaim VAT on costs, but some online help disagrees and says you cannot)

The relevant statutes are VAT notice 700/1

Para 2.3 Taxable supplies
A taxable supply is any supply made in the UK which is not exempt from VAT. Taxable supplies include those which are zero-rated for VAT.
(so supplies made in the USA do not count for someone like me in the UK)

IF the value of the taxable supplies you make is over a specified threshold
THEN you must register for VAT

So since these are not taxable supplies, no need to register.
So now I can try to sell more and worry less. :slight_smile: