UK VAT Law

From the knowledge base:



This is not right, tier is paid a month behind so are they going to not charge VAT on the tier held from before this date?

According to my account details, that's exactly what they're going to do. They are quite illegally going to bill me an amount with VAT added, backdated to September 14, 2007, when as an EU consumer, I should have assumed that VAT was already included in the price.

If the amount being charged is significant, or if you're bothered by this out of principal, give Consumer Direct a call. From what I can tell in-world, some Brits are making a concerted effort to get people to call CD in the belief that the more people who call, the more seriously the issue of backdated VAT charges will be taken.

I'm going to wait until seven days before my billing date, and if nothing changes, I'll give them a call. The amount I'm being overcharged is trivial. I spend several times more on a night out. But that's not the point.

That's how I see it. My account page says my next tier payment due is $88.13, but that is based on ownership before Sept 27th and the VAT notice was given.

This whole thing is a mess isn't it? On Monday, a friend of mine is going to be billed 17.5% extra on a half-region, even though there won't be enough funds on her credit card to cover the cost. The notice given by LL wasn't even enough to send in a credit card payment to cover the difference. She's not the sort to have a coronary over LL's consistently backass decisions, but this one hits her very directly. I just hope good friends like this don't drop out of game in the long-run, even though that appears to be her (understandable) intention now.

Yet another great bombshell from the wonderful caring people at LL, dropped on us on a friday as always when the staff are not around for the weekend to help us and field the questions, an all to common LL stunt as most already know lol, anyways we run a registered business here in Holland so have a VAT number so i went to the webpage as instructed in the email, followed the instructions to the letter to register our number with LL and when we did we got:

We are unable to complete your request.
• VAT ID XXXXXXXXXXXX has been reported as invalid. Please enter the actual VAT ID only. Do not include any extra spaces or punctuation. Do not include the country ISO code. It is taken from your country of residence.

I replaced the VAT number with X's of course for this post but again LL hasn't got the infrastructure even to check the numbers as ours is certainly valid and was entered correctly as they asked on the webpage lol. Ive submitted a support ticket of course but i wont hold my breath waiting for a reply.

Peace

Lord... a general point (don't know if this applies to you or not, but others have made postings about using their VAT registration) ... If your SL activities are demonstrably connected to your RL VAT registered business, you should be OK to reclaim the VAT. But if you intend to use your business number to reclaim the VAT to basically reduce the cost of doing a personal activity, that's a no-no. These things DO get audited.

Inc

I think it's worrying for quite a few of us. Only a couple of weeks ago I bit the bullet after island renting for my business and purchased 1/4 sim above the going rate. I had to plough back in all the profit I had made up til then which I had put away for Christmas for my son. It wasn't a decision I took lightly but thought it would give the business a chance to grow and the land was perfect for my requirements.

Only two weeks in I now have a higher monthly fee to cover with sales, plus the land prices could go even lower with dumping due to people not affording tier and less spending money across the grid.

I do understand that taxes have to be paid, but there was no warning and we are being charged on tier based on ownership the month before giving nobody a chance to re-asses or tier down if they are unable to afford the new fees. The price listing pages still have no menton of VAT to be added for anyone new coming in, seems you will only find out once you have purchased.

All I can hope for now is the business does do better now moved and halloween brings more sales in the next month

We are just using SL now for our RL business as in we use SL to advertise the RL website so yes we are OK to reclaim in this instance as to us we show it as an advertising cost on our books

Peace

I entered my VAT number with the country prefix included. This was the correct thing to do in the absence of any prior instruction to the contrary.
It was accepted, and my tier amount dropped back to US$75.
The amount is asterisked to the note: "Includes Value Added Tax (VAT)"

My Billing Rate was ans is still shown as US$70 Annual. There is no mention of VAT.
Given that this appears in the same document as an amount which was noted as including VAT, LL have added more to the mess.
As posted all over, all EU consumer prices MUST include VAT., and can show a VAT breakdown.


There's no sign of LL#s VAT number anywhere, not any statement of VAT in my transactions.
These are things that the business *MUST* have for our accounts.




LL (and their 'expert' advisors) don't 'get' a lot of things like
- European Data Protection
- EU VAT
- Customer Service

Basically they are a bunch of techie nerds and wannabes, with an eclectic borked inventory of business-process attachments that they bought from a variety of vendors.

So it now seems SL is governed by EU laws about Tax purposes..(Which sould nt be added anyway, but should be paid out of what we pay)
Does that mean EU gambling laws apply to EU residents
We are allowed slot machines and the likes over here

Tried that and didn't work. I used every possible combination of our VAT number and still no joy, kept telling me it was an invalid VAT number, lets hope the idiot tax advisors at LL sort it out, i for one have had my fill of these idiots attempting to run a business.

Peace

Not sure if it's any help, but you can verify your VAT number online: http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=en

If your VAT number validates there, but doesn't for LL you can at least point them to a resource where they can check for themselves.

You are a darling Kitty many thanks i can validate my VAT number there so will go and add to the support ticket

Thanks again

They still put everyone that was spose 2 pay on the 27th back a day so this vat tax thing came into effect which i feel was wrong. Linden Labs sure knew what they were doing i dont mind paying taxes but i would of liked a bit more notice than putting my payment back a day and the email the day i had 2 pay 2 notify me about it i dont think that was very fair on any1 and im very disappointed how they went round this 1 Lindens should of done it in a more organized manner than 2 just lay it on us like that if it wants 2 go with EU ruiles with vat i feel we all should of had a bit more notice in some ways i think they should do euro only sims so we could have gambling back coz it aint against our laws with this gambling thing its with the USA's laws Lindens have clearly stated we are european so dont we have rights 2 have at least that back (i know im dreaming guys but its a point 2 Lindens)

A point, but probably very hard to do technically. I mean in theory, what would be the best of all worlds would be if LL could program every country's laws into the game, have every avatar have a "personal" set of restrictions based on where they live and the laws there, and so forth. But that's just way too complicated to program and police.

However you cut it. They messed up.
As far as I read it they have chosen to comply with an EU regulation rather than deal with each of the member states. Thereby catching everyone in the EU for VAT.
Why?
I have no idea. But they did have a choice NOT to do it at one point.
Am still going to wait for the HMRC response, and will be firing off a few emails to fair trading associations as well concerning the illegal lack of notice and advertising a cost which appeared to include all relevant taxes.
And yes. Damn right I'll be trying to make sure LL pay up all the VAT BACKDATED if it is really a legal requirement for the last X years. I'll report them as tax evaders to the HMRC if that's what it takes.
This is one I'm not going to let easily slip by.

You do realise, of course, if they decide to somehow "backdate" us too... you'll be the one getting the blame for it?

Broccoli

There will be no backdated VAT charges. The tax office will be happy enough with all the extra revenue LL have started to hand them and won't want to risk that increased revenue stream.

I've just about had it with these clowns. I've still not received any email regarding this, I've spent a thousand dollars or so over the last couple of months setting up a half-region sim in the face of LL's frankly staggering business incompetence and technical ineptitude, and now they're illegally hiking my tier by 17.5% (I'm not going to argue the toss about whether VAT is liable - I ain't a lawyer, though my understanding is that they are wrong in claiming they are required to charge it. It is, however, clearly and irrefutably illegal, under the EU and UK law they are suddenly so eager to comply with, to do so without (1) providing a UK VAT number and company address for LL, (2) advertising inclusive prices, or (3) providing anything remotely like adequate notice. Let alone effectively backdating it by several weeks. Illegal, period.)

I had been going to sink quite a lot more money and work into SL over the next few months (despite recognizing from day 1 that there were serious problems with the dysfunctional business model,) but no more. I'll hold where I am, and probably sell up on the mainland completely pretty soon (not even just because of this, but because I just know there'll inevitably be yet another blundering fiasco a few weeks or months down the road.) LL's so-called "expert advisors" are so dangerously ill-informed that they are steering the company into a swamp from which they may never emerge.
While it's not worth my while to waste time mounting a legal challenge, I imagine there are larger fish in this pond who may do exactly that - it's a no-brainer to win, assuming they do have any corporate presence in Europe that can be targetted.

The Lindens need to wake up and realize that people on this side of the pond are not just annoyed about the way this VAT issue has been handled. We are not just angry. WE ARE ****ING **** ****ED OFF!!!!! Completely and utterly ****ING ****!!!!! We are at the point where we'd like to **** **** **** AND **** **** ****S!!!!!!!!!!!!!!!!
Furious? Incandescent? Livid? Words fail me.

This isn't just another mildly annoying display of general corporate ineptitude, like the so many others that we've come to accept with weary resignation as the hallmark Linden style - it's several orders of magnitude more serious than the unreliable service, unresponsive communications and general unprofessionalism we endure daily. It is an open invitation for a large proportion of SL customers to say "**** it", cut their losses, and simply leave. In droves.

Second Life has such potential! I grieve for what it could have been, but never will be. Not while it's run by people with an apparent determination to drive all their customers away and strangle this newborn wonder in its cradle.

The sheer wasted promise - I could weep.

They are about to limit access to areas based on a flag in the avatar record ' Age-verified Y/N'. It's a database process that could be extended to other flags if the coding and table design is more object-oriented than spaghetti.

"Sorry - no entry. Yes, you are of age and not from a country that bars content here, but there are strobe lights here, and you know what that does to someone with your condition. Our insurance does not cover you."

Yeah! - extreme - but my mind wanders sometimes. It's the MetaNanny.

Regardless of LL's requirement to charge its EU customers VAT (as far as I can tell, it does have to), as many people here have said, it's gone about it in totally the wrong way.

Effectively, LL has increased the cost of SL to EU residents by 15 to 25 percent, with no advanced warning and with no clear explanation of what tax SL fees ALREADY included (California State tax, for example? - if so, are EU residents paying two lots of tax?).

Ok, so those of us in the EU already know that SL is geared towards the US majority, but to p*ss off a not insignificant percentage of its customers in such a manner seems to me to be commercial suicide. This inept handling of the situation will have serious implications for the SL economy as a whole too, not just for EU based residents:

Because SL now costs 15 to 25 percent more than it did last week - many EU based residents will be scaling back land tiers, reconsidering Premium accounts and thinking twice about Linden Dollar purchases. As a consequence, the SL majority - ie: USA based residents who make rl money from SL transactions (land sales, object sales) may find that the once booming (?) SL economy suddenly starts to slow as EU-ers tighten their belts and cut back on any transactions that are likely to attract VAT (yes, I know that resident<>resident L$ transactions don't attract VAT, but ultimately those Lindens have to come from the rl - and in the rl SL costs 15-25% more for EU residents that for USA based residents).

As we've found before (eg: "protected" land becomes "unprotected" without warning, thus devaluing adjacent land), LL doesn't have much of an idea when it comes to
(a) Effective communication with its customers or
(b) How economic systems actually work
So it's no real surprise that the VAT thing has been handled in its usual cack-handed way.

As has already been mentioned by others, SL has to conform to USA legislation with regard to content (e.g: gambling) , but also to EU legislation with regard to tax. This means that EU residents are doubly-penalised, doesn't it? – We’re subject to the morality laws of one state, but charged extra for the privilege by another.

While I don't blame LL for this situation - after all it just need to comply with all relevant legislation (however stupid!) - I do think that it needs to think much, much more carefully about the way it knee-jerk reacts to every "discovery" of a law that it needs to uphold and then just applies it without proper notice or (it seems) any depth of consideration for the implications such laws will have on SL and its economy.

Just to summarise what I've picked up from discussions so far which relate to your points Nicola:

* Perception of what constitutes a price increase is somewhat different between Americans and Europeans. Here, VAT is always included in the price. Over there, it's added at the till. Ie. The price you see on the ticket isn't the price you pay at the till. So over there, a tax increase does not equal a price increase. It equals a tax increase. However, because we in the EU are so accustomed tax being included and hidden in the price, a tax increase equals a price increase. It's one of those weird cultural things that Americans and Europeans will squabble over for eternity without resolution.

* No tax is applied to LL's fees. Their system doesn't work like ours in that regard at all, and my understanding is that interstate transactions are not taxable anyway. So no, we're not paying tax twice.

* Linden Lab's server farms are in the US, so obviously American laws regarding gambling will apply. The EU's "E-Business" VAT Directive (2003) has always been controversial, the UK government has always been against it (supporting the US's view that tax on digitised sales should be abolished altogether), and in fairness, it is not Linden Lab's fault that they're forced to comply with it. Granted, they've handled it badly, but the blame for the tax itself lies squarely with our friends in Brussels.

Walker,
Thanks for your response, and I take your second two points entirely.

However, with regard to a "perception" of a price increase as against a "tax" increase - While I understand that UK/US perception may be different, the bottom line is that for EU residents the cost of SL has jumped considerably and immediately and without any prior warning. My land tier of US $75 is now US $88.13. The cost to me of SL land has suddenly risen by 17.5%. It makes no difference whether that increase goes to LL or HMG - I'm paying out more money.

And it drive me ABSOULTELY mad that the price on the ticket excludes the tax that you are obliged to pay anyway (I see this on some UK websites). If the tax isn't an option, then, once again, the cost to me is the total amount of the money that I have to pay. If I see something for £5, but the tax is £95 (and the tax is compulsory), then I consider the cost of the item to be £100 - not £5 + Tax. I can understand the differentiation for VAT registered companies who have to account for costs as separate from VAT, but for the average consumer, the total price you pay is in fact the cost of the item. So, I stand by my point that for (the majority of) EU SL residents, the cost of residency has increased by 15 - 25% overnight.

I agree with this.



Just a point of clarification -- you're not paying *any* US sales taxes to LL. They do not apply to you, and sales taxes are *never* "included: in the price here -- they are always additional to the quoted price.

Same here. I'm paying 17.5% more too. I'm just pointing out that Americans (many of whom you're addressing in these forums) won't get how this is a 'price increase' due to our quaint little differences. To them, the price would be the same, but the tax would have increased. If sales tax rates increase in the US, the price tickets on products remain the same. Hence prices unchanged. It's only when they get to the till that the cashier adds the tax.

I get what you're saying about cost because I'm affected too, but ultimately that's not Linden Lab's fault, even though their planning , notice period and implementation does indeed stink.