VAT Coming for Digital Goods
From next January, VAT will be applied to digital purchases such as downloaded music, ebooks and apps. Currently, the lack of VAT on UK sales of these products is allowing vendors to pay little tax by setting up their offices in jurisdictions such as Luxembourg.
Amazon, Apple and many other companies sell such digital goods on a large scale. Digital purchases of ebooks, music, films and TV programs, and software such as apps are becoming increasingly popular. After new rules, which were first proposed by Chancellor George Osborne, take effect in January, VAT will apply to these products at point of purchase at the standard rate of 20%.
The change is expected to see yields from VAT rise by around £300 million. Consumers will see a corresponding increase in point-of-sale prices of goods, with songs on iTunes, for example, rising from a typical price of 99p to £1.16.