The Future of Downloads – What Could VAT changes do? | Prepaid365

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27 March 2014
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Downloads for under a pound have been commonplace for a long time, especially on Apple’s iTunes store, one of the main players in the download market.

But as the government announced changes to the VAT system in the 2014 Budget, several reports have suggested that downloads could increase in price.

However, it would seem that any potential changes could actually see cheaper download options, meaning an end to 99p downloads – but in a good way!

The government announced that the Treasury will block a VAT loophole that has allowed companies to charge tax based on where the download originated from.

Closing a VAT loophole

In some cases this means that it started life in locations with a VAT rate that is significantly lower than that of the UK – currently 20%.

However, the way the tax is charged could actually reduce the VAT rate for purchases made from a select batch of companies, of which Apple is one.

“As announced at Budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services,” said the 2014 Budget document.

“From 1 January 2015 these services will be taxed in the Member State in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.”

The example of Apple and iTunes

For the example of Apple, the new legislation could actually bring down prices, as its European operations are based in Ireland – where the VAT rate is 23%.

According to the official Apple store: “The VAT rate for Apple customers who purchase Electronic Software Downloads or other Apple products which are classified as services under EU VAT law will be 23% Irish VAT.

“This is because the place of supply of these products under EU VAT law is Ireland as the country from where Apple Distribution International makes these supplies.”

Other download stores such as Amazon and Google Play could also be affected by the changes, although to what extent remains to be seen.

With any potential changes still a year away, it is only possible to speculate in the current climate as to whether customers will actually see any notable differences.

Managing online spending

However, people wishing to manage their spending online, on items such as music downloads, may wish to invest in a prepaid card to limit spending.

For those with concerns over their funds, transferring some to a prepaid card can also help to control spending, as only the sum on the card can be spent.

The cards can however be topped up if necessary and can be replaced if they are lost or stolen without funds being affected.

Unlike credit and debit cards, prepaid cards are also not directly linked to a bank account, making fraudulent activity a lot more difficult.

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