There is a legitimate way around this draconian VAT rule coming into effect from 1st January 2015 for UK micro businesses selling certain digital products. The key is to follow the rules to the letter. If the EU wants to play dirty with small businesses, then we can too (but legally).

I am planning to implement the following rules for sales of a digital product that I provide (so what works for me may not necessarily be applicable to you), but it shows there is a way of staying in business and avoiding a dreadful amount of red tape and additional costs.

I currently sell a digital product as a very small sideline and therefore sales levels fall way below the current UK threshold for VAT. So I intend to separate out customers into 3 groups:

1. Sales to UK based customers – Sell via Paypal in the usual way. No vat will be applicable and no registration with VATMOSS is applicable.

2. Sales to customers outside of the EU – Sell via Paypal in the usual way. No vat will be applicable and no registration with VATMOSS is applicable.

3. Sales to EU customers (except UK) – 2 possible options:
a) Buy a physical book from me so No VAT will be applicable and no registration with VATMOSS is applicable. Customers will also gain immediate access to FREE digital products which come with the physical purchase, which will include a free copy of the ebook.
b) EU customers can purchase the digital product from a 3rd party, such as ebay.

This will be a little cumbersome, it means that the checkout process will not be a simple as it has been, but it legally avoids having to register for VAT and with VATMOSS. It still means that all other relevant laws relating to income tax, etc will still apply.