Do tax rules change for the sale of rights, including digital, to a US company?
Tax, for the purposes of the first part of this answer, is VAT. Brexit does not change our relationship on a fundamental basis with the US, and so the short answer is no.
As far as we know, there are no plans to revise the taxation of these sorts of arrangements more broadly. However, the UK-US withholding tax position needs to be monitored.
On direct tax issues, prima facie Brexit should not have an immediate UK tax impact on the sale of rights by UK persons or companies to US companies. This is on the basis that the tax treatment applied to such arrangements should not be dependent or influenced by whether the UK is or is not a member of the EU, given a US company would be the other party to the sale.
The underlying principles of tax law should remain unchanged by Brexit in terms of how such sale of rights would be treated for UK purposes. But it should be borne in mind that, subsequent to Brexit, other events could impact the position (like in the event of a change of government) and that such arrangements should be reviewed on a case-by-case basis.
What should be done about registered trademarks?
When we leave the EU, trademarked products will remain trademarked there. However, since registration takes four to six months, it is advisable to register trademarks in the UK ahead of leaving the EU.
What will happen to copyright?
As the UK is signed up to the Berne Convention, copyright will be protected in the same way after Brexit. The term of copyright will stay the same. In the longer term, the UK will be free to choose whether or not it continues to harmonise copyright with the EU.
Should I change my contracts?
It is worth Brexit-proofing any relevant contracts. Ensure in particular that territories are altered to include the UK separately, alongside the EU, and check the jurisdictions that are listed.
Some partners and suppliers are using Brexit as an excuse to renegotiate contracts. Check carefully before accepting any changes. You are within your rights to hold suppliers to existing contracts if issues arise. It is unlikely that the activation of force majeure clauses will be justified, as lengthy Brexit negotiations means issues around Brexit are unlikely to be considered unforeseen.
What will happen to VAT?
It is unlikely that VAT arrangements for books and ebooks will change after Brexit, but if you sell any other items beyond these it would be worth checking their status.
What will happen to Reverse Charge on digital products like ebooks?
Ebooks count as digitised products for VAT purposes, and are treated as services. B2B rules for services are not changing, but the rules for B2C supplies may create a change because in a no-deal scenario the UK will move from being an EU country to a non-EU country.
This will mean the UK no longer operates a single VAT registration for clearing local VAT charges on ebooks to other EU countries. This is known as the Mini One Stop Shop or MOSS. Therefore, if traders wish to continue to operate this scheme for EU sales they will be required to register for VAT in another EU country under the non-EU MOSS scheme.
As the UK will be outside the EU, there will also be a change to the application of the use and enjoyment rules for digital services. Right now, some countries (including the UK) have implemented use and enjoyment rules to change the place of supply to their own country, where otherwise the supply would be regarded as in the EU or outside the EU. As the UK will be outside of the EU, it is possible that the use and enjoyment rules for services may need to be reviewed again by businesses.
What are the VAT and duty implications for selling ebooks directly to consumers in Europe?
Ask your ebook distributor / provider what continuity plans they have made. They should also be able to keep you updated on how your revenue per title is likely to be affected. You may wish to consult with VAT specialists to review what else needs to be done, as each contractual supply chain is different.
On duty, ebooks will not be subject to customs process as they are transmitted electronically.
Will there be any changes to Distance Selling Threshold limits?
In a no-deal environment, distance selling rules applicable for VAT for B2C sales will no longer be applicable for UK sellers. If they are non-established sellers then they may need to register for VAT where sales are made. Depending on values, it may be worth maintaining an EU stock which can be topped up.
There is currently no customs duty on printed matter, and this will remain the case post-Brexit.
It’s recommended to check the duty rates for books to see whether duty will be chargeable on imports to the EU. Potential solutions will be dependent on the nature of sales, location of customers and values involved.
How will project-based consultancy services to the EU be affected?
It does rather depend on specific circumstances, but in general B2B consulting services, unless covered by one of a small number of exceptions, are subject to the reverse charge in the country of the customer. This is not anticipated to change.
What will happen to place of supply rules for UK businesses supplying services into the EU?
If the UK leaves the EU without an agreement, the main VAT place of supply rules will remain the same for UK businesses. The current ‘place of supply’ rules determine the country in which you need to charge and account for VAT. These rules are in line with international standards set out by the Organisation for Economic Co-operation and Development (OECD).
For UK businesses supplying digital services to non-business customers in the EU, the place of supply will continue to be where the customer resides. VAT on services will be due in the EU member state within which customers are resident.
Government advice on IP
The latest government advice and a checklist for companies providing services to the EU
The latest government advice and a checklist for companies providing digital services to the EU