Backdated VAT claim for Software from US

FrogMan

I purchased PC software (downloaded & Licence) from a US company in May 2017.
Now 4 months later, they have just sent me a request to pay them the VAT which they failed to collect at the time.
There is no explanation just a request to pay them for "VAT Compliance".
I understand VAT is payable for software downloads from Outside the EU.
I assume the HMRC have caught up with them and now they are hoping to recover their loss from customers.
Although a small sum - am I legally obliged to pay them after their error at purchase time?

Pennywise

FrogMan wrote: »

Although a small sum - am I legally obliged to pay them after their error at purchase time?

Depends on the exact wording of the order form/website, etc. If it said "$x plus VAT", then yes, but if it just said "$x" then no. Note they will also find it hard to take action against you if they choose the legal route to pursue it as cross-border legal actions are notoriously difficult and expensive. I think they're just trying it on once they've realised they've made a mistake. I'd just ignore them.

But, is there any way they could disable your software? You may think it's better just to pay rather than risk being locked out of your software or support being disabled, etc.

TheCyclingProgrammer

Is this Squirrel? Seen lots of chatter about this on Twitter this morning. They are even trying to collect VAT from customers who received the software for free as part of a bundle.

The short answer is: they can do one. Any liability to pay VAT to a relevant collecting authority (e.g. HMRC) is with the supplier. They have a duty to collect VAT from you though this may be inclusive of the advertised price (which is the normal way of doing things when selling to consumers). The best course of action is to ignore them though if I were you I'd be sending them a strongly worded email about the finer points of VAT and consumer law.

IMO this has nothing to do with VAT regs (and any implication by the supplier that the customer is obliged to pay this extra VAT in order to remain in compliance with their government's VAT rules is bogus) and everything to do with normal contract/consumer law. The supplier advertised something for a price. You offered to buy it for that price and paid for it. The supplier accepted that offer and payment and sent you the product. The sale has now completed.

What I suspect has happened: they are a US supplier and have recently discovered they should have been charging VAT to EU customers at their local rate and should have registered for VAT in an EU country under the VATMOSS rules that were introduced in Jan 2015 (technically this VAT treatment has applied for non-EU suppliers since 2003 but that's another discussion).

They've since registered and had their registration backdated and now find themselves liable to account for VAT on all their sales since that date and as a result have a hefty VAT bill. This is their liability and the only real course of action is for them to treat all sales as VAT inclusive and account for local VAT on the price that was paid (e.g. if the sale was equivalent to £1.20 for a UK customer they would have to treat it as if it were £1 + VAT). Instead they are trying to pull a fast one and trying to con previous customers into paying something they have no obligation to pay.

This is the email this company is sending out to customers in case anyone was wondering:
https://twitter.com/CraigGrannell/status/907523025473589248

FrogMan

Yes it is Squirrel. Thanks for the advice.

DigForVictory

If they are saying "Give us the VAT", & it's genuine albeit belated, then pay them & claim it on your next return.

It's a nasty hiccup to the cashflow but it isn't actually coming out of your wallet.

Besides which, every visiting VAT officer in the land will learn about Squirrel if it's that big a deal, so if it's ever questioned, you just have the copy invoice in with the current quarter's paperwork & "Ah!" - sorted. This isn't the first VATMOSS generated 'surprise' & it won't be the last.

TheCyclingProgrammer

DigForVictory wrote: »

If they are saying "Give us the VAT", & it's genuine albeit belated, then pay them & claim it on your next return.

It's a nasty hiccup to the cashflow but it isn't actually coming out of your wallet.

Besides which, every visiting VAT officer in the land will learn about Squirrel if it's that big a deal, so if it's ever questioned, you just have the copy invoice in with the current quarter's paperwork & "Ah!" - sorted. This isn't the first VATMOSS generated 'surprise' & it won't be the last.

Assuming this was a business purchase by OP and they are VAT registered (they didn't give that impression) then this would still be wrong because the US supplier should not be charging VAT to an EU based business (normally after providing evidence of business status such as a valid VAT number). Instead the customer should be accounting for VAT on the supply (which is a service) under the reverse charge rules. The VATMOSS rules do not apply to B2B sales.

If OP is a consumer (which was my assumption) then they should just ignore the demand as its nonsense.

TheCyclingProgrammer

In am embarrassing and rather disingenuous u-turn they are now claiming it was a request rather than a demand:

https://twitter.com/squirrels/status/907597427066245120

FrogMan

It was personal purchase. No vat refund available. But just seen the comments on Twitter from Squirrels 'they cannot force you to pay but are grateful for those who do'

paul_liverpoolfc

I've had this e-mail today also. I'm just ignoring it.

TheCyclingProgrammer

Actually the law hasn’t changed. US companies selling e-services (which includes software) have been required to charge VAT where the customer is based in the EU since 2003 under the VoES system, not since Jan 2015 when VATMOSS superseded it (and changed the rules so they applied as well to all EU abased businesses). AFAIK there was no threshold for this.

I’m sorry you’ve been left with a large VAT bill but you only have yourselves to blame for non-compliance. Trying to ask your customers to pay more money to help you settle your debt for something they’ve already bought under the guise of “compliance” is dishonest.

agrinnall

Just to clarify for anyone slightly puzzled by TCP's post, it was in response to a post from the software company which was posted in breach of the forum rules and has now been deleted.