VAT on online service & digital platforms

For the uninitiated, OnlyFans is an online content-sharing subscription service based in the UK. It allows individuals (“fans”) to follow “content creators” to receive articles, photographs and videos.

The VAT queries have mainly centred upon agency/principal and place of supply. As ever with agency/principal issues the key is to examine the contract, check the terms and conditions and then see if the parties hold themselves out in line with the contractual terms.

HMRC provide some guidance on this in their Taxable Person manual https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper36820

The supply of digital content throws up an interesting combination of the rules of agency and place of supply. The rules on digital services supplied business to consumer (B2C) are now aligned for both EU and non-EU customers, in that they are treated as supplied where the customer belongs and outside the scope of UK VAT, although there is the added glitch of having to register for non-union MOSS for those services supplied B2C EU.

However, Article 9A of the EU VAT Implementing Regulations 282/2011 states:

For the application of Article 28 of Directive 2006/112/EC, where electronically supplied services are supplied through a telecommunications network, an interface or a portal such as a marketplace for applications, a taxable person taking part in that supply shall be presumed to be acting in his own name but on behalf of the provider of those services unless that provider is explicitly indicated as the supplier by that taxable person and that is reflected in the contractual arrangements between the parties.

This has been reproduced in HMRC’s guidance on digital services to consumers for some time https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#vat-accounting-options-for-uk-businesses-supplying-digital-services-to-consumers-in-the-eu

Digital portals, platforms, gateways and marketplaces

If you supply e-services to consumers through an internet portal, gateway or marketplace, you need to determine whether you’re making the supply to the consumer, or to the platform operator.

The platform operator is supplying the consumer if the platform operator identified you as the seller but, sets the general terms and conditions, authorises payment or handles delivery or download of the digital service. Then the platform operator would be responsible for accounting for the VAT payment that’s charged to the consumer.

Digital platforms and accounting for VAT

If you operate a digital platform that third-parties sell e-services through, you’re liable to account for the VAT on those sales unless you meet all of the following conditions:

• digital platforms and everyone else involved in the supply must identify who the supplier is in their contractual arrangements
• invoices, bills or sales receipts must identify that supplier and the service supplied
• digital platforms must not:
• authorise the charge to the consumer
• authorise the delivery
• set the general terms and conditions of the sale

If you do not meet all these conditions, you must treat the sales of third-party e-services as if they were your own. You must declare any VAT that is due the responsibility for accounting for any VAT moves back to the person who supplied you if you’re giving intermediary services to that person.

The company which runs OnlyFans, Fenix International Ltd, appealed to the First Tier VAT Tribunal in October 2020 against HMRC’s assertion that they are to be treated as principal under Article 9A. Fenix contends that Article 9A “provides a new fiction that the agent is treated as making and receiving a supply. That fundamentally changes the approach to the liability of agents for their actions in the realm of VAT. It deprives parties of contractual autonomy”. https://www.bailii.org/uk/cases/UKFTT/TC/2020/TC07971V.html. This has resulted in a referral to the CJEU (before the Brexit deadline) regarding the validity of Article 9A and the decision is awaited.

In the meantime, this leaves content creators and their advisors in a state of hiatus. The advisable and least risky course of action is for content creators to account for UK VAT on the income they receive on the basis that as per Article 9A their services are treated as supplied to OnlyFans.