Does the plugin handle UK VAT?
Now the UK has left the EU, the Easy Digital Downloads EU VAT plugin continues to fully support UK VAT. This article explains what this means and how the plugin can help. You should read it alongside the following resources which are updated regularly:
This is not legal or financial advice. We recommend asking your accountant for personalized advice.
Do I need to collect UK VAT?
Even though the UK is no longer part of the EU, the UK has continued to impose the same rules on cross-border sales of digital products. This means that if you sell digital products to consumers in the UK then you must register for and collect UK VAT, and then pay it to the UK tax authorities.
Unfortunately the UK is no longer part of the European MOSS scheme which allows you to make a single tax payment to cover all the European countries, so you must register for UK VAT separately.
You can read more about the requirements in this article.
UK companies
If your company is based in the UK then you must:
- Charge UK VAT on digital products to businesses and consumers in the UK, if your company is VAT registered. This falls under domestic UK tax law rather than EU law. However, for your convenience we have built the UK VAT rate into our plugin so that is taken care of automatically. You must charge VAT to all your UK customers, even if they have a valid VAT number.
- Charge the appropriate rate of EU VAT on digital products to consumers in the EU. For example, if you sell to consumers in France then you must charge them French VAT. The VAT rate for each EU country is built into our plugin, so this is taken care of automatically. Our plugin will also allow EU businesses to enter their VAT number and have the VAT reverse charged.
- Send separate tax returns for the EU VAT and the UK VAT that you collect. Learn more about how to register for EU VAT.
Companies based in the EU
If your company is based in an EU country (i.e. not the UK), then you must:
- Charge UK VAT on digital products to businesses and consumers in the UK. This is because while the UK has left the EU, our understanding is that the UK is adopting the ‘place of supply’ rules into UK law. This means that you must charge UK VAT to consumers based in the UK even if you are outside the UK. As a result, we have built the UK VAT rate into our plugin so that is taken care of automatically. UK customers with a valid VAT number can enter this on the checkout and our plugin will reverse charge the VAT.
- Charge the appropriate rate of EU VAT on digital products to consumers in the EU. For example, if you sell to consumers in France then you must charge them French VAT. The VAT rate for each EU country is built into our plugin, so this is taken care of automatically. Our plugin will also allow EU businesses to enter their VAT number and have the VAT reverse charged.
- Send separate tax returns for the EU VAT and the UK VAT that you collect. Learn more about how to register for EU and UK VAT.
Companies based outside the EU
If your company is based outside the EU – for example the US or Australia – then you must:
- Charge UK VAT on digital products to businesses and consumers in the UK. This is because while the UK has left the EU, our understanding is that the UK is adopting the ‘place of supply’ rules into UK law. This means that you must charge UK VAT to consumers based in the UK even if you are outside the UK and EU. For more information, please see this link. UK customers with a valid VAT number can enter this on the checkout and our plugin will reverse charge the VAT.
- Charge the appropriate rate of EU VAT on digital products to consumers in the EU. If they have a valid VAT number (which they can enter on the Easy Digital Downloads checkout when you’re using our plugin) then they can have the tax reverse charged.
- Send separate tax returns for the EU VAT and the UK VAT that you collect. Learn more about how to register for EU and UK VAT.
Charging UK VAT
The plugin has the UK VAT rate built into it, so your UK customers will automatically be charged the current tax rate on the EDD checkout. You do not need to manually add the UK tax rate to your EDD tax settings.
VAT invoices
The plugin continues to add information about UK tax to your EDD invoices. There's a field on the settings page where you can add your UK VAT number. This will be displayed on invoices alongside your EU VAT number.
Storing information about UK VAT collected
The plugin continues to store the required information about the UK tax that you have collected, in exactly the same way that it does for your EU sales.
VAT reporting
The UK is still included in the VAT report that is provided by the plugin. When you do your VAT returns, simply report the tax on your sales from EU countries on your MOSS VAT return, and the tax from your UK sales on your UK VAT return. Each country is listed on a separate line of the report, so this is straightforward to do.
Reverse charge mechanism for UK businesses
Our plugin integrates the Easy Digital Downloads checkout with the UK VAT numbers database. When one of your customers enters a UK VAT number into the VAT number field, this will validate and reverse charge their VAT.