Proactive Paul

iPhone app developers and the VAT question!

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VAT law is weird - it talks about “supplies”!

How do you account for VAT?

I’ve had this question a number of times recently. The problem applies to all suppliers of downloadable software, so I’ll give you the general picture, and then at the end, there’s a bit specifically for app developers who get paid by Apple.

You’re in business right? And you’re based in the UK, with a UK VAT number? If you just said “yes and yes” that’s good, read on, otherwise contact a local accountant in your part of the world.

Generally

Selling software is a case of “supplying goods”. They might be intangible goods, but they are goods. CD or download? Doesn’t matter! They are goods!

Writing the code for somebody else’s software is “supplying services” , and more importantly (for VAT purposes) that’s a supply of intellectual services.

In both cases (goods or intellectual services) you need to know where your customer is based, because the rate of VAT depends on their address and their VAT status. I recommend that your sales process includes two questions and requires the customer to answer both of them.

• What is your billing address?
• If you are based in the EU, what is your VAT number? State “none” if you don’t have an EU VAT number.

Armed with that information, this little flow chart tells you what rate of VAT to charge.

You can check if an EU VAT number is valid by using this facility, it may or may not also give you the name and address. Try my VAT number (without any spaces) 690627612 . . .

http://ec.europa.eu/taxation_customs/vies/

At the time of writing, there are two VAT rates in the UK that you need to consider. The standard rate is currently 17.5%. And the zero rate is 0%. It’s important to say 0% when it’s relevant, because that is an actual VAT rate, and the amount of actual VAT is £0.00. Get it wrong (and use the wrong wording) and you might discover that you cannot reclaim any VAT on your costs!! There is no logic in tax law.

If you cannot establish the address and the VAT status of your customer then you could assume that they are UK resident and then suffer the VAT at the standard rate.

iPhone/iPad developers only

If you’re a UK VAT registered business, and you’re paid by iTunes, then you have just one customer and it is a Luxemourg resident, VAT registered business which is owned by Apple:

iTunes s.à r. l.
8 rue Heinrich Heine
L-1720 Luxembourg
TVA/VAT No.: LU20165772

Yes, Luxembourg is in the EU, and so if you follow the flow chart above, you charge iTunes 0% VAT!

Need a proforma? There’s one here.

Need more help? Call me - details here.

You should follow me on twitter here

Posted on 25 Aug 2010 by Proactive Paul

Cash, Systems, People

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More Profit in Less Time - The Wednesday Tip

Cash, then Systems and then People. That’s the way to grow a business.

It’s true that more than 50% of small businesses fail before they reach their 3rd anniversary. And the biggest reason that businesses fail is a lack of cash. So in order to give yourself a sporting chance, your new business has to focus on bringing in cash.

If you can’t do that in the early days, then you really don’t have much of a business.

Once the theory starts working in practice you then need to refine your systems. I recommend Michael Gerber’s book “The E-Myth” to help you do that. Finally, when you have a healthy, organised business, you get more people in to help you make it bigger and better.

Posted on 25 Nov 2009 by Proactive Paul

Think of a number, then double it!

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Tuesday Financial Focus

If you’re starting out in business, you could be one of the thousands of people who see their own business as a replacement for a previous job. And you may be thinking “if I can only earn £40,000 then that’ll be enough”. Substitute 30K or 50K or whatever figure you first thought of.

If that’s your approach to business, then you don’t own a business, you own a job. And when you go on holiday, your income will also take a break!

So take the number you first thought of, and double it!. Even then that won’t be enough, but it’s a good place to start. Instead of pulling in 40K, if you could only make 80K, then you could employ somebody else, and still have enough money to live on. And having first having had to establish a way of making 80K out of one person, you are then well placed to put your first employee to work, to earn another 80K. And then use some of that to employ a third person and so on.

Of course, I’m overlooking the overheads. Things like premises, a place for your team to work! OK, so think of a number and triple it! That’ll take you to the classic business model from the 1960s and 70s. You need a big sales figure, because one third will go to the staff, one third will go towards overheads and that will leave one third for you.

Posted on 24 Nov 2009 by Proactive Paul

No, not Sainsbury!

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Personal Development on Sunday

I have just had a look around the news web sites. The Times is reporting in Monday’s paper that Sainsburys is loosing shoppers to all of its rivals.

The Times attributes this to shrewd plans, marketing and promotional gimmicks at other leading supermarkets. No I don’t think so! It’s down to stupidity at Sainsburys.

I gave up visiting my local Sainsbury Hypermarket, because the staff love the PA system too much. It seemed to me that every 3 minutes, some hair brained youngster (usually female) would turn the volume up fully and bellow into the mic, saying something like . . .

I don’t have anything to say really . . .
but I do love the sound of my own voice . . .
THANK YOU FOR SHOPPING AT SAINSBURYS IN BECKTUUUUUUURRRN!

I no longer shop at Sainsburys, full stop. We all need to learn to treat customers with a little more respect.

Posted on 15 Nov 2009 by Proactive Paul

10 little bad things

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More Profit in Less Time - The Wednesday Tip

October has been an extraordainary month, with far reaching changes at Royal Mail, at Companies House, and to my own e-mail servers. You can read about all of that elsewhere in this blog. There has also been a knock on effect which has led to fundamental changes in my business calendar and to co-incidental modifications to my regular social calendar.

And, if you follow this blog, you will have noticed uncharacteristic gaps in the blog posts for October. That was a decision that had be taken, and it allowed me to focus on making “more profit in less time”. I have focussed on what has been important. Author and speaker Jim Collins says that the art of getting things done is to “allow 10 little bad things to happen every week”.

I don’t like the gaps in the October 2009 calendar on the left of this page, but by allowing that to happen, I have devoted more time to looking after customers.

Posted on 28 Oct 2009 by Proactive Paul

A changing media and “Open Platform”

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Technology Thursday

When was the last time you bought a newspaper? I haven’t bought one for many months now, and I read all of my news on line. I hardly ever watch TV either, because now I can get my news at whatever time I want it.

For 30 years I have been a Times reader, and I have watched BBC news at 9pm (and then they moved it to 10pm). Now I read any source of news, and that has been an eye opener. The Times has missed a trick.  Their web site is too buggy! It took me just one link today to come up with this:

And I see it all the time. Last week, I think I encountered this message 8 times in a row by using links which failed to deliver. And they are not links to obscure pages, they are primary links to major features.

Sometimes I click on the cartoon on their home page. Nine times out of ten it takes me to a cartoon which is any old cartoon, but not today’s!

So I am shifting allegiance. And remarkably for a life long Times reader, I am following The Guardian. And that’s for two reasons:

• The Guardian has repositioned itself to appeal to a wider audience, and some of it’s more colourful opinions have been moderated.
• The Guardian has embraced modern technology and the internet.

Their website is clean and uncluttered, and the articles are informative. But, more than that, I am impressed by the way The Guardian shares information. In this new era of an all pervasive web, the people at The Guardian have been able to get the techies on board. By that, I mean any geek, anywhere. The Guardian shares things through their Open Platform. That means that the current generation of teens and twenty somethings (who never buy a newspaper in paper form) will be drawn towards The Guardian as the new model of best practice in serious news delivery.

And the BBC? Their news web site looks like some sort of teenager’s magazine. There’s not much news there. And it’s all so superficial and lacks depth. And they use inverted commas too much! I know that if I read something, like today’s report on Arctic to be “ice free in summer” it means that it won’t be “ice free”.  It may not be a mass of pack ice in 20 years time, but I don’t think that’s the same thing as an absence of ice altogether.

Today’s report in The Guardian on the same subject has no inverted commas and is more realistic, it say a few decades. That’s 50 to 100 years, not 20!

And at least the links on the BBC and The Guardian work, unlike The Times.

You should follow me on twitter here

Posted on 15 Oct 2009 by Proactive Paul

Fishing in the right pond

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More Profit in Less Time - The Wednesday Tip

Most of our referrals mainly come from existing clients. That’s true of most businesses. And yet we still go networking, and attend things like Chamber of Commerce meetings.

If we really analysed our best source of referrals, we might be a little circumspect about where we go looking for them. It’s also true that you get your best referrals from your best clients, and your worst referrals from your worst clients.

Does that make you think differently? Could you save time and money by changing the way you focus your efforts? Are you fishing in the right pond?

Posted on 14 Oct 2009 by Proactive Paul

A message for my XYZ group

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Tuesday Financial Focus

I am told that in any organisation, you can divide the people into three groups:

• 33% of the people know what the goal is, but not their role.
• 33% of the people know what their role is, but not the goal.
• 33% of the people know nothing!

How many meetings have I attended where that mantra holds true? And imagine if your favourite football team worked in that way? Oh, they do?

Meetings in Germanic countries are brisk.  You go in armed with facts and figures and make decisions, quickly and definitively. Meetings in many British organisations swirl around this way and that with no agenda and no outcome.

A manager, originally from India, with training in America used to say to his new colleagues at their NZ company; nudging them gently with his elbow and whispering from the side of his mouth:

“Sit back and wait. We’ll be here for the next hour
discussing process and there will be no goal.”

Sure enough, for the next hour we discuss who wants what.  What we are trying to achieve collectively is not mentioned at all.  Who knows what we were there for, but we’ve had a spirited discussion about individual preferences.

Shouldn’t we all be doing something more productive . . . and profitable?

Posted on 13 Oct 2009 by Proactive Paul

Waitrose or Sainsbury?

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Lifestyle Saturday

Sainsbury is nearer, Waitrose further away.

Sainsbury is cheaper, Waitrose more expensive.

Sainsbury has a wider product range, Waitrose has much less floor space.

And yet, I would rather go to Waitrose! There has been a distinct pattern of me alternating between these two supermarkets over the past 10 years. Last week I reverted to Sainsbury for the first time in ages. OK, the apples were most assuredly not as good as the ones I’m accustomed to, and the broccoli was rather softer than it should have been, but the family has survived on Sainsbury’s food for the past week.

This morning, I went to Sainsbury again. I stocked up with the heavy items first, bottled water and cleaning materials, before heading back to the fresh food. I selected some salmon and some chicken. At least I tried to. I examined the food for freshness, and just could not find a satisfactory example of salmon, nor chicken. I gave up! I bought my “household” items and left.

On Sunday morning, I’ll be going to Waitrose in Wapping! As John Ruskin says, you get what you pay for.

Posted on 3 Oct 2009 by Proactive Paul

A Tax Haven No More

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Tuesday Financial Focus

Would you like an offshore company or an offshore trust? That’s easy! It might cost you a bit (and you might benefit from the arrangement if you are a UK non-dom), but the crtitical thing is not the vehicle itself, it’s the bank account.

I’ve seen cases get off the ground, but never really fly, because they couldn’t get an offshore bank account.

Now I have learnt that some tax havens are struggling in the current economic climate. The Cayman Islands, which is a British Protectorate with it’s own indepedent government, is in trouble! They need financial help and they have turned to Britain for a loan.

And guess what? The conditions of granting a loan are that the Cayman Islands reforms its tax haven status and starts introducing taxes. These steps may be small at first, but it’s the thin end of the wedge. I feel sorry for the people who set up a tax-free arrangement there. It won’t be tax free much longer!

Posted on 29 Sep 2009 by Proactive Paul