Almost certainly, especially if you sell to customers in the UK but your business is based elsewhere.
Based in the UK: £85,000 Based outside of the UK: £0, you’re liable for tax from your first sale.
Yes. You owe tax for the sale of cloud software subscriptions to customers in United Kingdom.
Yes. You owe tax for the sale of software downloads to customers in United Kingdom.
No. You don't owe tax for the sale of eBooks to customers in United Kingdom.
Yes. You owe tax for the sale of digital downloads to customers in United Kingdom.
Businesses based in the UK must register for sales tax when sales exceed £85,000. For businesses selling into the UK, there isn't a threshold so software sales are taxable from the very first sale.
The process is fairly simple but it can take up to 4-6 weeks before the process is complete and you receive your VAT number. This means it’s best to plan ahead and submit your registration before you actually need to as you can’t charge VAT on your invoices until you get your VAT number.
😐🌶️ It's not that complicated
Filing and remittance for businesses based in the UK is integrated into a majority of accounting and bookkeeping software, following the UK government initiative in Making Tax Digital. Remittance is usually payment by direct debit from your bank account.
For those based in the UK, who currently pay through VAT MOSS – this process might change slightly from January 2021 because of Brexit.
😩🌶️🌶️🌶️ It's crippling to the business / person
The penalties for non-compliance in the UK can be crippling to businesses. Even seemingly inconsequential errors like late payment or miscalculations can result in a surcharge of between 0-15% of the VAT liability and additional penalties that range from 30-100% of the amount owed.
Directors of businesses selling in the UK are ultimately liable for any issues in VAT payments. If a business is found to have evaded tax liabilities, penalties increase to criminal charges, including a prison sentence of up to 7 years and an unlimited fine.
Registering for VAT in the United Kingdom
😐🌶️ It's not that complicated