UK Tax Compliance for Digital Businesses

Today’s chosen theme: UK Tax Compliance for Digital Businesses. From VAT rules on SaaS and apps to Making Tax Digital, we translate complex requirements into practical steps you can put into action this week. Stay curious, ask questions, and subscribe to get timely updates that keep your digital venture confident, compliant, and focused on growth.

VAT for Digital Products and Services: The Essentials

Place of Supply for SaaS, Apps, and E‑Services

For UK digital businesses, B2C supplies of telecoms, broadcasting, and electronic services are generally taxed where the customer belongs. UK consumers pay UK VAT; overseas consumers may require foreign VAT registration. For B2B, reverse charge often applies, but evidence of customer status is critical. Ask questions below about your product model and customer mix.

VAT Registration Thresholds and Timing

If your UK taxable turnover exceeds the current registration threshold (recently increased to £90,000), you must register. Many digital startups register earlier to reclaim input VAT and signal credibility. Track rolling 12‑month turnover weekly. Comment with your current turnover cadence, and we’ll share a template for threshold monitoring and early‑warning alerts.

Selling to EU Consumers Post‑Brexit

UK businesses selling digital services to EU consumers cannot use the old UK VAT MOSS. You can register for the EU’s non‑Union OSS via a single member state or register in each relevant country. Keep two non‑contradictory pieces of evidence for customer location. Subscribe for a walkthrough on choosing a viable OSS hub.

Digital Links and API‑Enabled Records

Spreadsheets can still work under MTD, but only with digital links—no manual copy‑paste between systems. Use API‑enabled bookkeeping and a clear audit trail from invoice to VAT return. Map data fields for tax codes, and lock your period after filing. Comment with your tools and we’ll share tested integrations.

A Filing Near‑Miss That Taught Us Everything

A SaaS founder almost missed a first MTD deadline after a migration broke tax codes. The fix: a weekly VAT exception report catching zero‑rated mistakes, plus automated reconciliations before quarter‑end. The result was a calm submission and no penalties. Share your close calls—your story might help another founder.

Marketplaces, Platforms, and Reporting Duties

While deemed‑supplier rules are most visible for goods, platforms facilitating digital content may be treated as principal depending on contractual and payment flows. Clarify agency relationships, invoicing responsibilities, and VAT on fees. Document how users contract and pay. Comment with your platform flow, and we’ll unpack risk points together.

Corporation Tax for Digital Companies

Rates, Marginal Relief, and Forecasting

The UK’s main corporation tax rate is 25%, with a small profits rate of 19% and marginal relief between thresholds. Forecast quarterly to avoid surprises, and align pricing with tax‑inclusive margins. Share your runway and growth targets, and we’ll demonstrate a simple tax‑aware pricing sensitivity model.

R&D for Software and Product Teams

R&D relief has evolved, with a consolidated regime tightening eligibility and focusing on genuine technological uncertainty. Keep contemporaneous technical notes, sprint evidence, and time tracking for qualifying activities. Comment if you’re unsure what qualifies; we’ll send a practical worksheet your engineers can complete in under an hour.

IP, Transfer Pricing, and Going Global

As you expand, intercompany arrangements for development and licensing must reflect real activity and risk. Document where code is written, who controls roadmaps, and how IP is exploited. Good transfer pricing avoids disputes. Share your group structure plans, and we’ll outline common models and compliance checkpoints.

International Sales: VAT, Sales Tax, and PE Risks

EU, Non‑Union OSS, and Beyond

For EU consumer sales of digital services, consider non‑Union OSS to file one return covering multiple countries. Outside the EU, check local e‑services VAT rules—many countries tax B2C digital supplies with low thresholds. Subscribe for our expanding country index crafted specifically for app, SaaS, and content businesses.

US Sales Tax on Digital Services

There is no US VAT, but many states tax digital services and downloads. Economic nexus thresholds can apply even without a local office. Track revenue by state, map product taxability, and automate returns via a certified provider. Share your US revenue mix, and we’ll suggest a state‑by‑state prioritization plan.

Permanent Establishment and Remote Teams

Hiring abroad can accidentally create a taxable presence if local staff habitually conclude contracts or perform core functions. Use contractor policies carefully, assess dependent agent risk, and update contracts. Comment with your hiring map, and we’ll share a PE risk heat map you can adapt internally.

A Compliance Workflow That Scales

Create tax‑friendly accounts: separate UK and foreign sales, split zero‑rated and exempt items, isolate software capitalization, and tag R&D activities. Align tax codes to product categories and marketplaces. Share your current chart, and we’ll provide suggestions that make filings and audits materially easier.

A Compliance Workflow That Scales

HMRC expects robust records, typically kept for at least six years. Store contracts, tax determinations, customer‑location evidence, and API logs. Schedule periodic internal reviews to verify completeness. Comment on your current retention approach, and we’ll send an audit‑ready folder structure and naming convention guide.