VAT Information Notice

Last Updated: 15 September 2025

1. COMPANY INFORMATION

Company Name: DIGIFABRICA LTD
Company Number: 15390190
Registered Office: 71-75 Shelton Street, Covent Garden, London, United Kingdom, WC2H 9JQ
Email: info@bittenpay.com
Director: Ümit Sönmez
VAT Status: Not currently VAT registered

2. INTRODUCTION

This VAT Information Notice provides comprehensive information about Value Added Tax (VAT) obligations, exemptions, and implications for all users of the DIGIFABRICA digital marketplace platform. This notice covers current VAT status, future registration requirements, and VAT considerations for customers, vendors, and affiliates.

3. REGULATORY FRAMEWORK

3.1 UK VAT Legislation

Primary VAT Laws:

Value Added Tax Act 1994
VAT Regulations 1995 (SI 1995/2518)
Finance Acts (annual VAT updates)
VAT Notice 700: The VAT Guide (HMRC guidance)
VAT Notice 741: Place of supply of services

Digital Services VAT:

VAT Notice 741A: Place of supply of digital services
Digital Services Tax legislation
E-commerce VAT rules for digital platforms
Cross-border digital services VAT requirements
Making Tax Digital (MTD) for VAT compliance

3.2 International VAT Framework

EU and International VAT:

EU VAT Directive 2006/112/EC (retained provisions)
OSS (One-Stop Shop) EU VAT system
IOSS (Import One-Stop Shop) for low-value goods
Destination principle for digital services
Country-specific digital services taxes

4. DIGIFABRICA VAT STATUS

4.1 Current VAT Registration Status

Not VAT Registered:

Annual Turnover: Below £85,000 VAT registration threshold
Registration Date: Not applicable – below threshold
VAT Number: Not applicable – not registered
Voluntary Registration: Not currently pursued
Monitoring: Regular monitoring of turnover for registration requirements

Business Activity Classification:

Standard Rated Services: Digital marketplace platform services (20% VAT when registered)
B2B Services: Business-to-business platform services
B2C Services: Business-to-consumer platform facilitation
Commission-Based: Revenue through commission fees on transactions
Digital Platform: Electronic commerce and digital service provision

4.2 VAT Registration Threshold Monitoring

Threshold Management:

Current Threshold: £85,000 annual taxable turnover (2024/25)
Monitoring Period: Rolling 12-month monitoring
Registration Requirement: Automatic registration required within 30 days of exceeding threshold
Voluntary Registration: Option to register below threshold for business benefits
Future Planning: Preparation for VAT registration when threshold approached

Turnover Calculation:

Taxable Supplies: Commission fees charged to vendors
Platform Fees: Platform service charges and subscription fees
Excluded Items: Customer payments passed to vendors (not DIGIFABRICA revenue)
Timing: VAT registration triggered by past 12 months or next 30 days turnover
Documentation: Comprehensive records maintained for threshold monitoring

4.3 Impact of Future VAT Registration

When VAT Registration Required:

Commission Charges: 20% VAT added to platform commission fees
Customer Impact: VAT charges for UK business customers only
Invoice Requirements: VAT invoices issued for business customers
Record Keeping: Enhanced VAT record keeping and compliance
Returns: Quarterly VAT return submission to HMRC

Pre-Registration Preparation:

System Updates: Platform system updates for VAT calculation and display
Customer Communication: Advance notice to users about VAT implementation
Invoice Templates: VAT invoice templates and automation preparation
Compliance Training: Staff training on VAT compliance requirements
Professional Advice: Ongoing professional VAT advice and support

5. CUSTOMER VAT IMPLICATIONS

5.1 Business Customers (B2B Transactions)

When DIGIFABRICA Becomes VAT Registered:

UK VAT Registered Businesses: 20% VAT charged on platform commission fees
Input VAT Recovery: UK VAT registered businesses can recover VAT as input tax
VAT Invoices: Proper VAT invoices provided for all business transactions
Reverse Charge: Potential reverse charge mechanism for certain B2B services
Record Keeping: VAT invoices required for business VAT compliance

Current Situation (Not VAT Registered):

No VAT Charges: No VAT currently charged on any platform services
Business Expenses: Platform fees can be claimed as business expenses (subject to business tax rules)
Future Changes: Advance notification when VAT registration implemented
Price Transparency: All current prices VAT-free until registration required

5.2 Individual Customers (B2C Transactions)

Personal Use Purchases:

No VAT Recovery: Individual customers cannot recover VAT on personal purchases
Price Impact: VAT registration will increase effective cost for personal users
Digital Products: VAT on digital products varies by product type and location
Vendor VAT: Individual vendors may need to consider VAT registration
Consumer Information: Clear information about VAT implications provided

Educational and Business Use:

Mixed Use: VAT treatment depends on primary purpose of purchase
Business Training: Business training purchases may qualify for VAT recovery
Professional Development: Professional development costs may be VAT recoverable
Documentation Required: Proper invoicing required for business VAT recovery
Advice Recommended: Professional tax advice for complex situations

5.3 International Customers

EU Customers:

Digital Services VAT: EU VAT may apply to digital services based on customer location
OSS Registration: Vendors may need to register for EU One-Stop Shop
Customer Location: VAT treatment based on customer location and status
B2B vs B2C: Different rules for business and consumer customers
Professional Advice: Complex cross-border VAT requires professional advice

Non-EU International Customers:

Local VAT: Customer responsible for local VAT/GST obligations
Import Duties: Potential import duties on digital services in some jurisdictions
Currency Conversion: VAT calculated on local currency equivalent
Documentation: Proper invoicing for international business customers
Compliance: Customer responsibility for local tax compliance

6. VENDOR VAT OBLIGATIONS

6.1 UK Vendor VAT Requirements

VAT Registration Threshold:

Annual Turnover: £85,000 threshold for mandatory VAT registration
Digital Sales: All digital product sales count toward VAT threshold
Platform Commission: Platform commission is vendor business expense
Monitoring Required: Vendors must monitor their own turnover for VAT registration
Professional Advice: Recommended for vendors approaching threshold

VAT Registered Vendors:

VAT on Sales: 20% VAT charged on digital product sales to UK customers
VAT Invoices: Proper VAT invoices required for business customers
Input VAT: Platform commission VAT can be recovered as input tax
Returns: Quarterly VAT returns required
Record Keeping: Comprehensive VAT records required

6.2 International Vendor Obligations

EU Vendors:

EU VAT Rules: EU VAT rules apply to sales within EU
UK Sales: UK VAT rules apply to UK customer sales
OSS Registration: Consider EU One-Stop Shop for cross-border sales
Threshold Monitoring: Monitor turnover in each EU member state
Professional Advice: Essential for cross-border VAT compliance

Non-EU Vendors:

UK VAT Registration: May be required for UK sales above threshold
Local VAT: Responsible for VAT in country of establishment
Double Taxation: Avoid double taxation through proper advice
Documentation: Proper record keeping for international compliance
Currency Issues: Currency conversion for VAT calculation

6.3 Platform VAT Support for Vendors

VAT Assistance:

Information Provision: General VAT information and guidance
System Features: Platform features to support VAT compliance
Professional Referrals: Referrals to qualified VAT advisors
Documentation: Transaction documentation for VAT purposes
Updates: Regular updates on VAT law changes

Limitations:

No VAT Advice: Platform does not provide professional VAT advice
Vendor Responsibility: Vendors responsible for their own VAT compliance
Professional Consultation: Recommendation for professional VAT advice
System Support: Technical support only, not tax advice
Documentation: Platform provides transaction records, not VAT returns

7. AFFILIATE VAT CONSIDERATIONS

7.1 Affiliate Commission VAT

Commission Income:

VAT Registration: Affiliates may need VAT registration if commission income exceeds threshold
Business vs Personal: VAT treatment depends on business or personal activity classification
Input VAT: Marketing expenses may qualify for VAT recovery if VAT registered
Record Keeping: Proper records required for VAT compliance
Professional Advice: Recommended for affiliates with significant commission income

Platform Commission Payments:

Gross Payments: Commission paid gross without VAT deduction
Affiliate VAT: Affiliates responsible for their own VAT obligations
Documentation: Commission statements provided for tax purposes
VAT Invoicing: VAT registered affiliates must invoice platform appropriately
Compliance Support: General guidance provided, professional advice recommended

7.2 Marketing Expense VAT

VAT Recovery Opportunities:

Advertising Costs: VAT on advertising may be recoverable for VAT registered affiliates
Professional Services: VAT on professional services recoverable
Technology Costs: VAT on technology and software recoverable
Training and Development: VAT on business training recoverable
Travel and Subsistence: VAT on business travel recoverable (subject to rules)

Documentation Requirements:

VAT Invoices: Proper VAT invoices required for VAT recovery
Business Purpose: Clear business purpose required for VAT recovery
Record Keeping: Comprehensive records required for HMRC compliance
Mixed Use: Proper apportionment required for mixed business/personal use
Professional Advice: Complex VAT recovery requires professional guidance

8. DIGITAL SERVICES VAT

8.1 UK Digital Services VAT Rules

Place of Supply Rules:

B2C Digital Services: VAT charged based on customer location
B2B Digital Services: Generally where customer belongs
Platform Services: Platform commission subject to UK VAT when registered
Customer Classification: Importance of correctly identifying B2B vs B2C customers
Evidence Requirements: Evidence of customer location and status required

Digital Services Definition:

Software and Applications: Digital software products and services
Educational Content: Online courses and training materials
Digital Media: E-books, music, videos, and digital content
Website Services: Website hosting and related services
Electronic Communications: Email and communication services

8.2 EU Digital Services VAT

OSS (One-Stop Shop) System:

EU Registration: Single registration for all EU digital services VAT
Quarterly Returns: Quarterly VAT returns covering all EU sales
Local Rates: Different VAT rates apply in each EU member state
Customer Location: VAT based on customer location, not vendor location
Threshold Monitoring: €10,000 threshold for distant sales rules

IOSS (Import One-Stop Shop):

Low-Value Imports: For goods imported into EU under €150
Not Applicable: DIGIFABRICA deals with digital services, not physical goods
Information Only: Included for completeness and vendor awareness
Professional Advice: Complex EU VAT requires professional guidance

9. VAT COMPLIANCE AND RECORD KEEPING

9.1 VAT Record Requirements

When VAT Registered:

Sales Records: Detailed records of all taxable supplies
Purchase Records: Records of all business purchases for input VAT
VAT Account: VAT account showing VAT charged and paid
Invoice Copies: Copies of all VAT invoices issued and received
Return Copies: Copies of all VAT returns submitted

Digital Records:

Making Tax Digital: Digital record keeping required for VAT
Compatible Software: VAT software compatible with MTD requirements
Digital Links: Digital links between different software systems
Backup Systems: Secure backup and recovery for VAT records
Audit Trail: Clear audit trail for all VAT transactions

9.2 VAT Invoice Requirements

VAT Invoice Elements:

Company Details: Full company name and address
VAT Number: VAT registration number clearly displayed
Invoice Date: Date of invoice issue
Tax Point: Date of supply (if different from invoice date)
Customer Details: Customer name and address
Description: Clear description of goods or services
Net Amount: Amount excluding VAT
VAT Rate: VAT rate applied (20% standard rate)
VAT Amount: VAT amount charged
Total Amount: Total amount including VAT

Simplified VAT Invoices:

Retail Sales: Simplified invoices for retail sales under £250
Required Elements: Reduced information requirements
Business Customers: Full VAT invoices required for business customers
Record Keeping: Proper records required even for simplified invoices

10. VAT PLANNING AND OPTIMIZATION

10.1 VAT Registration Decision

Benefits of VAT Registration:

Input VAT Recovery: Recover VAT on business expenses
Professional Image: VAT registration indicates established business
B2B Credibility: Enhanced credibility with business customers
Cash Flow: Potential cash flow benefits from input VAT recovery
Compliance: Proactive compliance with VAT obligations

Disadvantages of VAT Registration:

Administrative Burden: Additional compliance and record keeping
B2C Price Impact: Effective price increase for consumer customers
Cash Flow: VAT payments before customer payments received
Complexity: Additional complexity in pricing and invoicing
Professional Costs: Professional fees for VAT compliance

10.2 VAT Optimization Strategies

Timing Considerations:

Registration Timing: Strategic timing of VAT registration
Supply Timing: Managing timing of supplies for VAT purposes
Input VAT: Timing of input VAT claims for cash flow
Annual Accounting: Consider annual accounting scheme for small businesses
Flat Rate Scheme: Consider flat rate scheme for simplified VAT compliance

Business Structure:

Group Registration: VAT group registration for related companies
Division Registration: Separate registration for different business divisions
International Structure: International structure for cross-border efficiency
Professional Advice: Professional advice essential for complex structures

11. FUTURE VAT DEVELOPMENTS

11.1 Digital Economy VAT Changes

Emerging Trends:

Digital Services Tax: Potential expansion of digital services taxation
Platform Economy: New VAT rules for digital platforms
Cryptocurrency: VAT treatment of cryptocurrency transactions
AI and Automation: VAT implications of AI and automated services
Cross-Border Trade: Evolving rules for cross-border digital trade

Regulatory Monitoring:

Legislative Changes: Regular monitoring of VAT legislation changes
HMRC Guidance: Ongoing review of HMRC guidance and notices
EU Developments: Monitoring EU VAT developments affecting UK
International Trends: Global trends in digital economy taxation
Professional Updates: Regular professional development and updates

11.2 Platform Adaptation

System Preparation:

VAT Calculation: System capability for VAT calculation and display
Geographic Rules: Implementation of location-based VAT rules
Customer Classification: Enhanced customer classification systems
Reporting Systems: Comprehensive VAT reporting and analysis
Integration: Integration with accounting and VAT software

User Communication:

Change Notification: Advance notification of VAT-related changes
Education Programs: User education about VAT implications
Support Enhancement: Enhanced support for VAT-related queries
Professional Referrals: Network of professional VAT advisors
Documentation Updates: Regular updates to VAT information and guidance

12. PROFESSIONAL VAT ADVICE

12.1 When to Seek VAT Advice

Recommended Scenarios:

Approaching Threshold: When annual turnover approaches £85,000
VAT Registration: Decision making about VAT registration timing
Complex Transactions: Complex or unusual transaction structures
International Sales: Cross-border VAT implications
Business Changes: Significant changes in business model or structure

Professional Services:

Chartered Accountants: General VAT advice and compliance
VAT Specialists: Specialized VAT advisory services
International Advisors: Cross-border VAT expertise
Software Providers: VAT software and system implementation
HMRC Liaison: Professional representation with HMRC

12.2 VAT Advisory Resources

Professional Bodies:

ICAEW: Institute of Chartered Accountants in England and Wales
ACCA: Association of Chartered Certified Accountants
CIOT: Chartered Institute of Taxation
VAT Practitioners Group: Specialist VAT advisory organizations
HMRC: Official guidance and support services

Online Resources:

HMRC Website: Comprehensive VAT guidance and information
Gov.UK: Official government VAT information
Professional Firms: VAT guidance from major accounting firms
Industry Publications: Specialist VAT and tax publications
Training Providers: VAT training and education services

13. CONTACT INFORMATION

13.1 VAT Information Requests

General VAT Questions:

Email: info@bittenpay.com
Subject: “VAT Information Request”
Response Time: Within 48 hours

13.2 Business Customer VAT

VAT Invoice Requests:

Email: info@bittenpay.com
Subject: “VAT Invoice Request”
Information Required: Company name, VAT number, invoice details

13.3 Professional VAT Advice

Disclaimer: DIGIFABRICA does not provide professional VAT advice. Users should consult qualified tax professionals for specific VAT guidance.

Recommended Resources:

HMRC VAT Helpline: 0300 200 3700
Professional Advisors: Consult qualified accountants or tax advisors
HMRC Website: gov.uk/topic/business-tax/vat

14. UPDATES AND CHANGES

14.1 VAT Status Monitoring

Regular Review:

Monthly Turnover Review: Regular assessment of turnover against VAT threshold
Quarterly Compliance Check: Quarterly review of VAT compliance requirements
Annual Planning: Annual review of VAT strategy and planning
Legislative Monitoring: Ongoing monitoring of VAT law changes
Professional Consultation: Regular professional VAT advice and updates

14.2 User Communication

Change Notification:

VAT Registration: 30 days advance notice of VAT registration
Price Changes: Clear communication of VAT impact on pricing
System Updates: Notification of system changes for VAT compliance
Legal Changes: Updates on VAT law changes affecting users
Professional Resources: Updated professional advice resources

15. GOVERNING LAW

This VAT Information Notice is based on current UK VAT law and HMRC guidance. VAT obligations are governed by UK tax law and administered by HM Revenue and Customs.

16. EFFECTIVE DATE

This VAT Information Notice is effective from 15 September 2025 and reflects the current VAT status and obligations as of this date.

17. DISCLAIMER

Important Notice: This VAT Information Notice provides general information only and does not constitute professional tax advice. Users should consult qualified tax professionals for specific VAT advice and compliance guidance. VAT law is complex and subject to change, and individual circumstances may vary significantly.