Until now we have been responsible to HMRC for VAT payments on our sales. Our annual turnover is far below their threshold value, however, so there is no need to register with them. Simple.
There was a quiet change in the law on 1 January 2015, as a result of a decree by our friends in Brussels. It affects VAT levied on sales of downloads (and nothing else), including our Files Emporium downloads. Our sales in the UK are unaffected, and so too are sales to the Rest of the World. For purchases in all the other countries of the EU, however, the VAT now falls upon the buyer.
Suppose someone in Spain downloads one of our files costing £1. The VAT in Spain at present is 21%, so the transaction would immediately incur a debt of 21p to the Spanish tax authorities. The tax collecting burden still lies with us, the seller. We are required to declare it to the authorities in Spain; and, though it is entirely up to us whether to charge the buyer or foot the cost ourselves, we are obliged to find a way to settle the debt and transfer the 21p over to Madrid. If next week someone in Ireland chooses to download that file, Irish VAT is 23% so that would mean we now owe Dublin 23p as well...and so it could go on. Potentially there are 27 different tax authourities in the EU, apart from ours.
A new tax gives rise to a fresh offence: new-tax dodging. Who has the onus of policing it? We do. It is our responsibility to check for fraud. I am supposed to check for evidence that every single order ostensibly from a British address isn't really one from someone elsewhere in the EU trying to avoid his 21p of tax. We are obliged to preserve that evidence for ten years. So much for cutting red tape!
In case you are wondering, last year we had three download orders which would have come under this law - one each from France, Portugal and Italy. From 1 January 2015 to the time of composing this, so far we have had none.
I have written to the seven MEPs in the eastern region, three of whom are UKIP and so might be sympathetic! My plea is that common-sense should prevail, so there is an annual threshold below which this VAT is not levied. I won't hold my breath, though.