Even their own tax page (linked to below) says that donations are considered earned income. HMRC does not care where it comes from or what it's called. It's income.
I agree it's income, but it's also a tip. Like if I sent $5 to your Paypal account directly. You need to declare that, but does Paypal care whether I owed you $5 or it's income?
Good question actually. What's Paypal doing about VAT?
I can only answer for the UK, but we have to go back to last autumn, when everyone started finding out about VATMOSS at all. HMRC did not communicate anything about EUVAT to anyone but businesses above a certain size which were already VAT registered. Their estimate was that only 34k business would be affected. So part of the outcry was the fact that marketplaces, gateways, and payment processors were not advised or consulted. They found out the same time everyone else did, in the same way everyone else did. One of them was PayPal, who were expected by the EU to be compliant in time for 1/1/15. This was news to them. HMRC were forced to admit they had no idea that gateways like Paypal did not already capture the information required to create the place of supply burden of proof, nor that your average non-technically minded microbusiness knew how to handle the API and the information passing through it.
http://www.clarejosa.com/articles/from-passion-to-purpose/up...
One would hope that by now that it's all been sorted.
Nothing. They're a payment processor, not a marketplace - it's up to the actual vendor to handle tax. Money I make via PayPal is not PayPal's revenue at any point, whereas I believe Patreon takes payment direct and then pays its members through commission.
(HMRC answered the same question that way in an online chat - lost the link to the transcript, but it's out there.)
I forgot to include the part where every EU creator will also be obliged to register as a data controller with their national data protection authority, to ensure proper reportage and archiving of the VAT invoices which must be kept in a retrievable format for 10 years.
Compliant marketplaces take care of that for you so that the individual seller/creator does not have to register as a data controller.
Per this law, the third party marketplace/gateway is responsible for compliance and liability. That is how everyone in the EU affected by the law views it, and it is why most marketplaces and platforms are slowly but surely coming into compliance.
This particular marketplace, on the other hand, hired a consultancy firm whose raison d'etre is tax avoidance http://www.bbc.co.uk/news/business-31147276, who proceeded to give them what they paid for. That tax advice was so incredibly wrong it was almost laughable; it misrepresented the "place of supply", the fundamental piece of information behind the entire continental tax change.
https://idea15.wordpress.com/2015/01/20/vatmoss-place-of-ser...
This issue is not a question of extraterritorial sovereignty or individual responsibility. It's about dodgy tax advisors giving dodgy advice to a company which paid good money for it.
> Because that's what EU law, and its member states, have decreed. For example, here is the guidance from HMRC in the UK.
But Patreon is not in the EU's jurisdiction and therefore isn't subject to their laws (with the exception of any treaties that the US has with the EU).
> …hired a consultancy firm whose raison d'etre is tax avoidance…
You keep saying that like it's bad. The whole point of tax accountants is make sure that a business or individual pays the minimum legal amount they have to.
This is where the reciprocity promised to the world by the US over FATCA (the US's extraterritorial tax law) may begin to rear its head. Every bank and financial system in the world has had to comply with US tax law with no choice. Sooner or later the world is going to want to claw back the money it has had to spend on compliance.
We probably should have clarified that this is an online and and offline law affecting all sales and purchases, not just e-commerce ones.
The law provides better protections to consumers, but it also provides some protections to retailers against some of the dodgy practices they've had to deal with from consumers. Returns and expenses are a HUGE part of the law.
My favourite bit is what I call the "anti-wardrobing provision". Under the new law, when you return an item, retailers can now deduct a fair percentage of its cash value from your refund if you have returned it clearly damaged or un-resellable. This is because of wardrobing - the practice of buying an item of clothing, deliberately keeping the tags on, wearing it once, and returning it for a refund stinking of your night out.
