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Where Taxpayers and Advisers Meet

Tax - Global software licenses from the UK

G0009348
Posts:2
Joined:Tue Nov 08, 2022 7:55 pm
Tax - Global software licenses from the UK

Postby G0009348 » Tue Nov 08, 2022 8:04 pm

Hello,

I'd like to try and sell software licences, out of a UK register company to an online application for periods of 30 days. Potentially I could have somebody with a business purchase licences from any country in the world, and I'd like they to pay via paypal.

Could somebody please advise if this is a) is even feasible or would it be so complex I need to limit the markets I sell to and b) how I would even approach considering the tax implications?

Thanks

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: Tax - Global software licenses from the UK

Postby Trevor S » Wed Nov 09, 2022 9:09 am

This reply is limited to VAT issues, you may need to consider the impact of other taxes. I've also assumed that you're already VAT registered.

Income from UK-based businesses will be subject to VAT, so you'll need to issue VAT invoices to them.

Provided that the non-UK customers are businesses, putting your software to business use, the "place of supply" is the country where they belong. This means that you don't charge them VAT. Customers who are in the EU would have to do a "reverse charge" - this means that they calculate VAT at the rate in their country and pay it over to their tax authorities. Other foreign countries may have similar requirements. All that you need to do is collect and retain evidence that your customer is in business abroad. For EU customers this could just be their VAT registration number (these can then be checked online) - for other countries you'll just need some other formal document.

The payment method isn't an issue - PayPal is fine. You just need to account for VAT and issue VAT invoices for the UK customers, and obtain and retain the evidence of being in business for the non-UK ones.

G0009348
Posts:2
Joined:Tue Nov 08, 2022 7:55 pm

Re: Tax - Global software licenses from the UK

Postby G0009348 » Wed Mar 22, 2023 1:07 pm

Thank you for the reply - that's really helpful.

What constitutes a formal document? Can it be something as straight forward as a example letter head with business address on?

Or are we talking something more formal like an official incorporation document?

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: Tax - Global software licenses from the UK

Postby Trevor S » Sat Mar 25, 2023 1:07 am

HMRC's notice 741A, section 6.3 states:

"If your customer is unable to provide a VAT number you can accept alternative evidence. This includes certificates from fiscal authorities or other commercial documents indicating the nature of the customer’s activities in their home country."

So certainly more formal than a letterhead. HMRC aren't too specific, as what's available will vary from country to country, but I'd aim for something issued by a government body / tax authority if possible. Or maybe a business bank account document - obviously account numbers and transactional details could be redacted first.


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