Q:
Hi All,
I have read hrmc website, but nothing on this
I run an adult website, and when a user pays to signup, he gets access to members area where he downloads all videos etc People from usa, uk signup, aswell as all over europe. Will I have to pay vat on this?
A:
The information IS on the HMRC website, it’s just that you need to know where it is. And of course it’s never as simple as it looks.
As with all of the forum queries, I can only give general information about the subject and tell you where to look on the HMRC website so that you can find the details you need to work out the answer. It’s a bit complicated in your case but I think that you’ll be able to figure out the answer once you’ve looked at the information that I’ve summarised below.
There are two separate issues that you need to consider – the first is the normal rules for membership subscriptions and second, the rules for services supplied to overseas customers.
As a starting point, remember that the default rule for anything VAT related is that if you’re in doubt, charge VAT. Unless the legislation states otherwise, the supply is liable to VAT at the standard rate.
• Membership Subscriptions
However in the case of membership subscriptions, the VAT liability of any supply normally depends on what the member receives in return for their subscriptions. If they are subscriptions for an online service, then it depends what that service includes and there are a wide variety of different types of membership schemes available on the internet. Each individual case could be different as it depends on the contractual agreement of the club/association/membership scheme etc concerned.
HMRC VAT Notice 701/5: Clubs and Associations http://tinyurl.com/3426qtr explains the VAT liability of supplies made by such organisations. Have a look at the notice to see how it might apply to your business. As you’ll see, some supplies are exempt from VAT, although the exemption is normally limited to certain non-profit making organisations such as trade unions and political, religious, patriotic, philosophical, philanthropic or civic bodies.
Section 5 of the notice here http://tinyurl.com/3ynux53 explains the VAT liability of membership subscriptions and as you’ll see, membership subscriptions are normally liable to VAT at the standard rate, unless they include specific zero-rated or exempt elements – such as printed matter or insurance cover.
• Overseas Members
Now about those overseas members – see section 5.13 of the notice about supplies to overseas members – it explains that where supplies are made to customers who belong outside the UK, the rules about the VAT liability are different. The supply of services to overseas customers comes under a particular rule called “the place of supply of services” (or “POSS” for short). It’s explained briefly here https://vatexchange.co.uk/vat_glossary in the Glossary on this website and I suggest that you read this so that you understand the principles involved before going any further.
The basic rule is that the if the customer is a private individual who belongs in the UK or any other EC country, then the supply is liable to UK VAT. If the customer belongs outside the EC, then the supply is not liable to VAT.
So that’s the starting point and applies to most situations. The POSS rules are complicated but in general, if the service concerned doesn’t qualify to be treated under the general rule or is otherwise free from VAT, then you charge VAT.
The general rule applies to certain services that are listed in the VAT legislation. It applies to a wide range of services although membership subscriptions aren’t specifically included in the list. As with the rules for UK clubs and associations, the liability is determined by the nature of the services supplied in return for the subscription.
The legislation includes certain electronically supplied services, such as the following:
“(c) the supply of images, text and information, and the making available of databases,
(d) the supply of music, films and games (including games of chance and gambling games)”
The above quote comes from the UK VAT legislation and is explained in further detail in VAT Notice 741A: Place of Supply of Services which is here http://tinyurl.com/yht446x on the HMRC website. See section 15 of the Notice for further information about the services that fall within this heading. Section 15.12.12 lists the electronically supplied services that are included and section 15.12.13 lists the services that aren’t included. N.B. If the services aren’t included in this list, it’s possible that they could be covered by the general rule under a different part of the legislation, but hopefully your situation will be covered here.
Membership subscriptions that allow members to access special members’ areas and download videos would typically come under this heading. In that case, income from UK and EC members will be liable to VAT, but income from non-EC members is not liable to VAT.
So this is the general rule and from what you’ve said, it’s likely that this will apply to your situation. But you need to confirm that your own membership falls within these provisions. If you need any further help, I’d be happy to provide formal advice through our formal consultancy services – see the contact details in the “Our Consultancy Services” section in the menu.
Marie
26 September 2010