In the past, selling digital goods (ie music) required VAT registration and entry into the MOSS scheme. In it’s self it wasn’t expensive, but the additional accountancy costs were prohibitive to be VAT compliant, particularly in the light of the relatively small earnings that could be made from music sales.
By way of trying to find an effective and fair solution to this situation, I started making music available as a free download whilst encouraging people to make a donation if they liked the tune. This has been very successful on the first release using this ‘honesty box’ method.
It’s now come to light following a discussion with the HMRC that provided you are not charging VAT, that your sales don’t exceed 10,000 euros annually (averaged over a 2 year period) and your business revenue doesn’t tip the compulsory VAT registration threshold, you CAN sell your music online through your own website.
This is a big deal as it is the only way of being anywhere close to independent and breaking free from a distribution system that’s failing independent artists across the board.
Sites like Bandcamp or Patreon all have operational costs they need to cover, so although they give you a good deal as an artist, it’s still not a great one !
For any other labels or artists considering selling directly, please do your own research however the links below were very relevant:
Below is a transcript of my chat with the HMRC
K*****: 10:42AMWelcome to HMRC Webchat. You’re speaking with K*****.
Christopher: 10:43AM Hi K*****
Christopher: 10:43AM I’m looking to sell music online through my own website but am wondering what the VAT implications are ?
K*****: 10:44AM More information can be found here, it does say you have to be VAT registered first. https://www.gov.uk/guidance/register-and-use-the-vat-mini-one-stop-shop#how-the-vat-moss-scheme-works
Christopher: 10:45AM if my sales are unlikely to reach £300 in a year, would I still need to register for the MOSS scheme ?
Christopher: 10:45AM which would imply that I’d need to VAT register
K*****: 10:47AM It does say on the guidance that if you business is below the threshold but you still have digital sales to EU countries you must register for VAT to use the Union Moss Scheme.
Christopher: 10:48AM OK, so I could simply exclude the EU from my ‘store’ ?
K*****: 10:49AM I cannot confirm a definitive answer sorry you need to read the guidance and make a decision based on this.
Christopher: 10:50AM Please excuse my ignorance – If I sell an audio file online as a sole trader, would I be charging VAT ?
K*****: 10:52AM So you would charge VAT but the VAT moss return is for EU sales, and any UK sales will be on the VAT return.
Christopher: 10:53AM OK, but if I’m not VAT registered, I wouldn’t be charging VAT ?
K*****: 10:54AM That is correct.
Christopher: 10:55AM So I could sell online, not charge VAT unless I exceed the VAT registration threshold ?
Christopher: 10:55AM or the digital sales threshold of 10,000 euros
K*****: 10:57AM Correct.
Christopher: 10:57AM Thank you very much – This is a big deal for the independent music business. Thank you for your assistance