MiPod: a matter of taste
I’ve finally given in and bought myself an iPod. It’s unlike me to resist a gadget this long but I must have known how it would go. Now I am loading my entire music collection on to it. ‘Feed me, Seymour, feed me’ says iTunes each time I walk past my laptop.
Apart from consuming inordinate amounts of time, this exercise has led to some interesting discoveries. I hadn’t realised, for example, that there were so many references to Customs’ officers in Carmen – but then I’d forgotten about all the smuggling. I also learned that the title of the Cherubini opera ‘Les Deux Journées’, refers to the two days in which Cardinal Mazarin imprisoned the President of the French Parliament for vetoing his tax laws. Jean-Baptiste Colbert, who succeeded Mazarin and became finance minister to Louis XIV, is reputed to have said that ‘the art of taxation is to pluck the maximum number of feathers from the goose with the minimum amount of hissing’.
I’m not an opera buff – I admit to falling asleep in La Somnambula – and most of my friends would roll their eyes if asked to comment on my taste in music (Sa Ding Ding, Nusrat Fatah Ali Khan, Nitin Sawhney and Sigur Rós are amongst my favourites). Now putting my iPod on shuffle gives me the opportunity to lull them with a little Mozart before hitting them with the Pogues.
When it comes to purchasing music, it’s worth remembering that consignments of goods with a combined value of less than £18 qualify for relief from UK VAT and import duty. This explains why it’s often cheaper to increase your CD collection by buying from a supplier based outside the EU (the Channel Islands, for example), and is also the reason why your order may arrive in more than one package. If you download music, different rules apply and UK VAT is chargeable where the seller is based outside the EU. As with all things VAT-related, however, nothing is as it seems – the Isle of Man is not outside the EU for this purpose but the Channel Islands are.
For anyone who ever wondered what accountants would come up with if they were to allowed to pitch their song ideas, there was an email doing the rounds a while ago with a few possible suggestions. Have a look at these three which amused me:
*** UPDATE – December 2014***
LVCR is an EU relief. Article 23 of Directive 2009/132 provides that goods of a total value of less than €10 must be VAT-free when they are imported into the EU. Article 23 allows Member States to increase this limit to a maximum of €22. From 1 November 2011 the UK’s LVCR was reduced from £18 to £15. As many of the commentators on this change have pointed out, most DVDs and CDs cost less than £15 so what was the point?
Those of you who have read Spilling the beans or its a mug’s game will be alarmed to hear that the change in amount will mean an increase in the number of packages where the UK Border Agency has to apply a VAT charge manually.
LVCR has not applied to supplies of goods from the Channel Islands since 1 April 2012. It had been suggested that some of the large retailers affected by this change would simply move their operation to another non-EU country, such as Switzerland. In November 2012 the Guardian reported that on-line retailer, The Hut, had closed its warehouse in Guernsey and was shipping from a site outside Chicago to preserve its entitlement to LVCR.
The Value Added Tax (Imported Goods) Relief (Amendment) Order 2014 which has effect from 26th September 2014, amends Group 8 of Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984. Article 2 substitutes a new Note (2) and (3) to Group 8 of the Schedule. New Note (2) provides that Item 8 (relief on consignments of goods not exceeding £15 in value) does not apply to goods imported on mail order from the Channel Islands. New Note (3) defines ‘mail order’ as follows:
‘any transaction or series of transactions under which a seller (S) sends goods in fulfilment of an order placed remotely,
‘remotely’ means by any means that do not involve the simultaneous physical presence of S and the person placing the order, and
‘seller’ does not include any person acting otherwise than in a commercial or professional capacity.’
This means that the exclusion of LVCR on the importation of goods from the Channel Islands is limited to goods imported on mail order as permitted by Article 23 of the Directive.
Plus ça change …
In February 2013 the European Commission referred France and Luxembourg to the European Court for applying reduced VAT rates to the supply of digital services, such as e-books, music downloads and streaming of movies. Both countries have been applying a reduced rate to those supplies since January 2012. The reduced rate is 7% in France and 3% in Luxembourg.
Assuming that the European Court agrees with the Commission that the reduced rate is not permitted under EU law this will close a tax loophole that has encouraged companies such as Amazon, Skype and Netflix to base themselves in Luxembourg to benefit from the 3% rate when selling throughout the EU.
From 1 January 2015 the VAT rules for the place of supply of digital services (such as music downloads, web-hosting and e-books) from a business to a non-business customer will change so that the place of taxation will be where the customer (not the supplier) is based. Companies like Amazon who have been taking advantage of Luxembourg’s low VAT rate on certain digitally supplied services to undercut suppliers based in other Member States will no longer be able to do so as. There’s more about this in my December 2014 blog.
Tax lawyer specialising in business tax, SDLT and VAT