UK VAT Law

A simple message to UK residents from someone that has the joy of dealing with VAT on a fairly regular basis at work.

From the HMRC website:

"Do these rates apply to all goods and services?

No. Some supplies are exempt from VAT, which means that no VAT is payable. Also supplies are outside the scope of VAT if they are:

* made outside the UK and Isle of Man"

Clearly the Second Life service originates from outside the UK / IoM. Or I want my gambling back!

Someone in LL has messed this up badly and doesn't seem to have checked with HMRC on the application of VAT to services originating outside the UK. It is possible that the HMRC themselves don't understand the nature of SL, but that's for LL to argue on our behalf.

I sent a support ticket in this morning explaining LL's error and suggest every UK resident does the same. Refer them to:
http://customs.hmrc.gov.uk/channelsPortalWebApp/
channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_001222&propertyType=document

Sorry URL wrapped because it was ugly as a single line.

(I'm sorry bu I don't have time to check every other country in the EU for individual Tax law).

I also contacted Linden Labs and sented support ticket and asked what is their V.A.T code in Finland and if they are registered as VAT paying company to Finland.

I also asked legality of this action from Finnish Tax burecracy and i am asking their answer about matter.

That applies to goods, SL is a service not goods. Arguably falls under VAT Act 1994, Schedule 5, Paragraph 7A as a telecommunication service originating outside the UK and is therefore vatable.

The reality probably is that no-one knows whether SL is vatable. If they get it wrong LL's UK (and EU) operations could be in serious trouble. My guess is they are playing it safe.

Interestingly, the premium subscription rate does not seem to have changed, at least on my account, and I paid my annual sub yesterday. I cannot see why tier payments should be treated any different for VAT purposes than the subscription.

if any of u guys find a way for us dutchies (holland) to get out of this vat nightmare, i`ll give u 1 month VAT as finders fee as i have no damn clue about all this legal crap

SL is definitely a 'service'


In hawaii we have to file for GE tax, and I just did mine and had to file it under "services"

Didn't you guys read the blog announcement? It was all explained very clearly there.

Sorry, I get extra sarcastic after 1am...

Excuseme but where?

the only thing i understood from the blogs is "we can`t do crap right, forgive our incompitence and ignorance, complain as much as u wish while we close the comments and ignore the forums, ty for OUR patience"

It does not exist. Sorry, I was being sarcastic. LL has given no public announcement and no communication other than an email sent to some EU customers.

And actually I think Linden Labs is seriously wrong about this issue. Let me tell how VAT system in Finland works:

There is VAT-registered selling company AA which has V.A.T Code number 111 and there is purchaser BB who is also VAT registered and has V.A.T code number 222. Both of these VAT registered informn montly (yes every moth) about their VAT sales and purchases for tax burecracy and pay them monthly.

Ok so company AA is selling product. Products costs 10 euros and VAT 22% is added so total sum is 12,2 euros. Purchaser company BB buys membersip and pays 12,2 euros to company AA.

So companies enter transaction to heir ledgers and inform VAT tax burecracy.

Company AA
We have VAT sales for company BB V.A.T code 222 total 2.2 euros during September

Company BB
We have purchased products from company AA V.A.T code 111 which are under V.A.T total sum 2.2 euros during September

Company AA pays to VAT tax to Finnish tax burecracy total sum of 2.2. euros for September VAT sales

Company BB get from VAT returns from Finnish Tax burecracy total sum of 2.2 euros.

There are no freaking VAT exemption in Finland (Linden Labs is saying that if you have VAT code you inform that and we dont claim it). If they are claiming it they have to claim it for every product/service sold. They also have to inform monthly Finnish tax burecracy about their VAT sales and if there has been VAT registered purchasers. Tax Burecracy of Finland then returns payd VAT's to VAT registered parties or companies.

Go the link and read it again. The text is answering the question:



The answer uses the word "supplies" to refer to both "goods" and "services".

Part of Linden Labs is based in the UK (actually just down the road, can see em out of the window)

But the sections of the VAT guide that relate specifically to services clearly say something different. I don't think you can "make" a service, goods are made, services are provided.

In any event what the guide says is ultimately irrelevant, the guide is just that, guidance, not law. If SL does count as a telecommunications service for the purposes of the VAT Act then it is vatable, whatever the guide says.

Oh , lord.

Can you pop over and ask them to post something about this on the blog? Much obliged.

Why are people upset it wasn't on the blog? If you are affected haven't they sent you an email? If you are not affected why would you want to know?

I got mine yesterday, which I'm happy to say is the day after I upgraded to annual membership and paid my first sub.

I am upset it wasn't on the blog two months ago which is about the right period of notice required for price increases. The extra fee was added to our accounts before the e-mails were sent out. I purchased a large amount of land just over a week ago based on what I could afford with no information of a price hike.

In the UK you cannot put a price on something and then charge VAT on top without the figures stating excl. vat. Anyone new also wont have details of the extra charge when looking at the prices, there is no mention of VAT being added on the land priceing page.

I expect those not in the EU are worried about their investments considering around half the residents will be effected and could mean major amounts of land going on the market to down tier making the economy unstable again just after the Casino effect.

No, Alazarin who is my main account (premium + tier-payin + some cashouts), has received no notification whatsoever. One of my alts which is basic (pays no tier and never cashes out) received notification. Not the best organised system over there at LL.

Looks like the land market in SL is about to take yet another tumble.

You should look for 2002/38/Ce. Approved by the EU May 8, 2002.

See also:

http://www.sdmadeira.pt/PressCentre/BreakingNews/en-brknews47

http://www.unescap.org/tid/projects/ecom04_s7dino.pdf

I have had no email. I will be affected if VAT applies to premium membership fees.

imogen

do us all a favor and blow up that building so they move back to the US

i`ll even agree with u that england suck in ur own thread!!!

I'm wondering if they are sending out the emails the day after you pay your tier/subs. So in effect giving you a month's notice of the change?

As I said earlier I got mine a day after my sub was due (don't have any tier to pay), although why they would send emails to basic accounts who don't have to pay anything I have no idea.

Is VAT being charged on the Lindex?

I just checked with an accountant who is pretty sure that a service provided from wholly outside the UK does NOT attract VAT. I have raised a suppport ticket with LL and asked for an explanation supported by documentation. Might get an answer this side of christmas.

Did you tell him that LL have a registered business presence in Brighton, and that payments for said service are processed in England?

My tier is due in two weeks, so not everybody got a month's notice. Haven't heard from anybody whose tier is due in the first few days of October yet. Anybody?
That's a grey area isn't it? I understand that they're not because users are buying and selling from each other, but LL is still faciliating the transactions and many sellers on the Lindex are European so VAT should certainly be levied onto their Linden sales. That's basically how Ebay works. If you buy something from somebody in the European Union, Ebay slaps a VAT charge onto the transaction afterwards. It doesn't matter where in the world the buyer is located - they still have to pay the charge.