Since Brexit, selling a £20 ebook or online course to someone in France comes with VAT paperwork that surprises most UK creators. Get it wrong and you’re either overpaying tax or building up a liability.
Here’s how VAT works on digital products sold from the UK to EU customers, and the simplest way to stay compliant.
How Do I Handle VAT on Digital Products Sold to EU Customers From the UK?
The key rule: for digital services sold to EU consumers (not businesses), VAT is due in the customer’s country, at that country’s rate — not the UK’s. This is the ‘place of supply’ rule, and it applies to ebooks, downloads, online courses, software and streaming. So a UK seller must charge French VAT to a customer in France, German VAT to one in Germany, and so on. The good news is you don’t need to register in 27 countries: the EU’s One Stop Shop (OSS) scheme lets UK businesses register in one EU member state and file a single quarterly return covering all EU sales. Alternatively — and this is what most small sellers do — sell through a platform like Gumroad, Etsy or a marketplace that handles EU VAT as the ‘deemed supplier’, which takes the whole problem off your plate.
If you sell business-to-business, the reverse charge usually applies: you zero-rate the sale and the EU business customer accounts for the VAT themselves — but you must verify and record their VAT number. Keep meticulous records either way: customer location evidence (two pieces, such as billing address and IP country), invoices showing the VAT charged, and OSS filings. The most common mistake is treating EU consumer sales like UK sales and charging 20% UK VAT — that’s wrong, and it leaves you owing the difference to the customer’s country. When in doubt, an hour with a VAT-savvy accountant costs far less than a multi-country assessment.
Worth knowing
Late payments are a tax on the polite. Set clear payment terms on every invoice (14 or 30 days), send the invoice the same day as the work, and chase the day it goes overdue — not a month later. Most late payers aren’t malicious, just disorganised, and a friendly systematic chase gets results. For persistent offenders, consider deposits upfront or late-payment interest, which UK law entitles you to charge. Cash you don’t collect is work you did for free.
VAT registration sneaks up on growing businesses. The threshold (currently £90,000 of taxable turnover in a rolling 12-month period) is easy to drift past during a good year, and registration is then compulsory — backdated. Keep a rolling eye on turnover, and consider voluntary registration earlier: it lets you reclaim VAT on purchases and can make you look more established to business clients. Talk to your accountant before you cross the line, not after.
Practical Steps to Get Compliant
First, work out your EU consumer sales volume — if it’s tiny, routing sales through a compliant platform may be the pragmatic answer. If you’re selling direct, register for the non-Union OSS scheme in an EU member state (Ireland is the popular choice for English speakers) and file quarterly. Make sure your checkout captures customer country and applies the right VAT rate automatically — most modern ecommerce platforms handle this if configured. Review the arrangement yearly as sales grow, and keep all records for at least ten years, which is the EU’s requirement for digital services records.
Networking still works, despite everything the internet promised. Local business groups, trade associations and even the regulars at a co-working space generate referrals that no ad campaign can buy — people recommend people they know. You don’t need to love small talk; just show up consistently, be useful, and follow up. One good contact a month compounds into a powerful network within a couple of years.
Your suppliers should be reviewed as ruthlessly as you review your own prices. Loyalty is admirable, but an annual quote comparison keeps everyone honest — including your current supplier, who may suddenly find room to move when asked. Small, regular savings on materials, merchant fees and utilities compound into serious money over a year. Put a recurring reminder in your diary; future you will be grateful.
Planning doesn’t have to mean a 40-page document nobody reads. A one-page plan — where the money comes from, where it goes, what success looks like this year, and the three things that could go wrong — reviewed quarterly, outperforms most formal business plans. The value isn’t the document; it’s the habit of thinking ahead instead of reacting.
Cash flow deserves a paragraph of its own, because it quietly decides the fate of more small businesses than any competitor ever will. Profit on paper means nothing if clients pay in 60 days and your suppliers want paying in 30. Build the habit of forecasting 13 weeks ahead — a simple spreadsheet showing money in versus money out — and you’ll spot the crunch weeks while there’s still time to act. Chasing invoices isn’t rude; it’s business. The firms that survive are the ones that treat cash collection as seriously as sales.
Pricing is where most small business owners leave money on the table. There’s a persistent fear that raising prices will drive customers away, but in practice a modest increase rarely does — and the extra margin funds better service, which wins more customers than being cheapest. Review your prices at least once a year against rising costs; standing still is the same as a pay cut. And quote with confidence: hesitation at the pricing moment costs more sales than the number itself.
The essentials to remember
- EU consumer sales: VAT is due in the customer’s country at their rate.
- OSS registration in one EU state covers all EU filings quarterly.
- Marketplaces like Etsy/Gumroad often handle EU VAT as deemed supplier.
- B2B sales usually use reverse charge — verify the customer’s VAT number.
- Keep location evidence and records for 10 years.
You might also want our take on Will AI replace accountants and bookkeepers, plus How long does it take to get a GP appointment in the UK right now for the practical next steps.
It’s worth checking HMRC’s guidance for working for yourself for the authoritative guidance on this.
What I’d do next
On digital sales to EU consumers, charge VAT at the customer’s country’s rate and report via the OSS scheme — or sell through a platform that handles it for you. Don’t just charge UK VAT and hope for the best.
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