Crazy_Fool - 11:18 am on Jul 20, 2003 (gmt 0)

Linda - if you haven't done so already, go and see your accountant. I think you'll find it much simpler than it looks. Nobody here can give you a definite answer unless they work for HMCE or they are an accountant and can see your business / website details.

In general, you will charge 17.5% on all sales within the EU. You may not need to charge VAT to non-EU customers, but there is no requirement NOT to charge - therefore you can charge if you want to - it all helps the UK economy! But like others have said, you must see your accountant and check with HMCE.

July 1st has been planned and publicised for a long long time. It affects non-EU companies so shouldn't affect you.

As a brief summary:
Companies like AOL were able to provide services in the UK to UK consumers without charging VAT. They were US companies with a UK "subsidiary" targetting UK customers - to all intents and purposes, the UK "subsidiary" was run as a UK business, but they were technically exempt from UK VAT. I believe that the exemption was caused by "place of service" rules - I believe that AOL dial ups are routed through the USA, that Ebay servers are in the USA etc etc, meaning that because the service was performed outside the UK, they were technically exempt from UK VAT.

This meant they could provide the same services as UK companies, but cheaper - this gave them an advantage over UK companies.

The issue became fairly high profile a couple of years ago when a UK ISP (freeserve?) took HMCE to court for not forcing a US ISP (AOL UK?)to charge VAT. The matter was taken up by the EU, which looked into more aspects of it and came up with the July 1st proposals.

Under July 1st legislation, non-EU providers providing services to EU citizens / companies must register for VAT in the countries they supply services to and charge VAT at the appropriate rate for the country in which the service is used - ie, they must register with HMCE and charge 17.5% to UK citizens / consumers / businesses, they must register with the French VAT office and charge VAT at French rates to French consumers / business etc, and so on.

DISCLAIMER - this is from memory and I can't be certain that this is 100% accurate, but the info is all online if you want to search for it - I don't have time to search and verify everything :(