Thursday, 18 December 2014

Goodbye for now, PDF patterns


I've been avoiding mentioning this on my blog as I was hoping that it would resolve itself before January 1st, but that's now looking increasingly unlikely. I think that most digital sellers are now aware of the changes in EU law that make it virtually impossible for small businesses to continue to sell their eBooks, patterns and digital products as of January, but for everyone else, I wanted to let you know that my patterns and eBooks will be taken off sale in the next week or so, so if there are any that you know you'd definitely like to own, now is a good time to buy them. You can find all the relevant links in my left-hand sidebar or on my Patterns page (I feel compelled to mention my favourite pattern here, as if you have a small person in your life, a bear or doll's sleeping bag makes a really wonderful Christmas gift - you can find the pattern here…and if you have any concerns about the correct sizing for your particular bear or doll you can find a post entitled Unwieldy Antlers and Other Sizing Issues, here! You will get to see a reindeer, guinea pig, sausage dog and other creatures being stuffed into a sleeping bag to trial sizing…it's every bit as fun as it sounds.)

To give you some background on this, EU legislation around VAT is changing from 1st January, but this doesn't just affect EU sellers, it affects all digital sellers worldwide. Currently, when you buy a digital product, the VAT is paid in seller's country - this means that big businesses can base themselves in tax havens and avoid paying VAT on their sales. To try and stop this kind of sneakiness, the EU have altered things so that VAT is now payable in the buyer's country too. While we have a very high VAT threshold in England (you'd have to earn around £81,000 before you started paying VAT here), in other countries it's set at all different rates, many of them at 0. This means that if I sell even one product to an EU country, I would require two pieces of evidence to ascertain the buyer's location (PayPal doesn't currently give me this kind of information about my buyers) and I would then need to submit a quarterly VAT return to every single country that I sold to. As a small business this is prohibitive in terms of both time and cost.

My e-book: A Practical Guide to Machine Appliqué 
HMRC and the EU seem to have had no awareness until very recently as to how these changes would cripple small businesses  - this, of course, was never their intention, but it is now impossible to sell digital products directly through your own website or blog, as I do, without exposing yourself to this VAT nightmare…just selling one pattern for 1p or 1 cent to an EU country would legally require a VAT return to be submitted there. Initially, HMRC made over-simplified assurances that if you sold through a third party platform, such as Etsy, Folksy or Craftsy,  it was the platform's responsibility to do all this paperwork, rather than yours. However, HMRC had misunderstood how platforms like these work - we are paid directly by the customer on these platforms and then pay Etsy a monthly bill, giving them a cut of our sales profits, so this no longer stands as it's a scenario where no one pays the VAT.

Unfortunately, whether they're part of the EU or not, this change affects ALL digital sellers worldwide. This will mean that from January it may be really difficult to buy many of the digital products that you usually buy.

The hope is that platforms like Craftsy, Etsy and Folksy, with their larger infrastructures and finance departments full of people who wouldn't be reduced to snivelling heaps attempting to put the structures in place to handle all these VAT payments, will step up and offer a solution - they have a vested interest in doing so as they stand to lose a huge amount of money if all their digital sellers withdraw their products from sale. If they aren't able to do this, it will mean the demise of literally thousands of small businesses. I'm really hopeful that they will make this happen, which is why I've held off mentioning this here on my blog, as I was hoping it would be a simple case of just transferring the location of my patterns. But it's now December 18th…and it's looking like this may not happen as we'd hoped, at least not in time for a smooth transition on January 1st.

There has been some talk that the changes affect online advertising too. While this might be the case, all of my sponsors are based within the UK only, so for this reason, I'm happy that this side of my business will survive, at least.

I'm really lucky that my main source of income - the business I run with my husband, making our educational Squeebles apps for children - isn't going to be affected by these change, as the VAT is paid at the point of sale. For that I'm hugely grateful, but I'm feeling sad that my own little pattern business is coming to an end for now. Even if I'm able to sell again through an online marketplace like Etsy at some point in the future, it feels a great shame that this change in VAT legislation means it will be very difficult to sell independently through our own websites or blogs - that feels like a step backwards. One of the incredible things about the internet has been the ability for cottage industries to spring up and for it to become viable for so many people to run their own businesses from home, working independently in their own niche areas. This doesn't just affect craftspeople - it affects everyone from people selling eBooks on how to do your own accountancy, to people producing paid-for webinars teaching people how to use Photoshop or Illustrator.

What I want to say more than anything at this point, is how incredibly grateful I am to everyone who has bought patterns from me over the last five years - I have really appreciated your support and it's a real delight to see what you've made with them. It was my blog readers who encouraged me to write my very first pattern and without your faith in me, I don't think it's something I ever would have ventured into. I can still remember the first time a confirmation email from PayPal landed in my inbox saying that I'd made a sale…it was the most incredible feeling and since that point, as I've added more patterns to my site, those emails have continued to land in my inbox daily. I am so grateful. Thank you.

If the situation doesn't look like it will be resolvable, my intention is to make my existing patterns available free of charge, as I'd much rather they were out there for people to enjoy than sitting unsewn on my laptop, but I hope you'll understand my need to hold off on that for a little longer to see how this unfolds, as financially it's not an easy prospect to suddenly lose this source of income.

Patterns aside, I have been doing a great deal of Christmas sewing and I'm looking forward to sharing some of it with you in my next post.

Florence x

36 comments:

  1. This is just terrible! Digital patterns are often the only way many of us out here can afford to get great patterns without having to pay the horrendous postage charges and added custom duties that are charged! As an example, I was recently attempting to purchase ONE skein of thread from an online retailer....the thread would have costed $2 and the postage to get that skein to me? Over $7!!!!
    And the impact this will have on so many small businesses in today's turbulent economic times ?! Once again proves that policy makers in their ivory towers and mega buck salaries have NO idea what it's like living in the real world!

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    1. I think until the last few months, no one had really realised what the impact would be for small businesses. I'm sure that this wasn't their intention, so I have everything crossed for some kind of u-turn. I'm lucky in that I don't have a paid-for website invested in selling my patterns, but for some sellers the loss of their main business will be huge, even if third-party marketplaces do become available. I agree, it's not just the sellers that lose out though - PDFs are a way of making the whole thing more affordable.

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    2. Yes...but that's what angers me...before you implement policy you make pretty darn sure that you've thoroughly investigated and looked at all aspects....and if it becomes apparent that you overlooked a vital impact then man up and admit it and postpone implementation until consultation with all affected parties!
      Laws like this will barely scratch the bottom of the multi corporation for which it is clearly meant to be targeting. And again the man on the street ...the little business owner...is the one that gears the brunt of the impact.

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  2. I am struggling with this too! There is a petition set up here: https://www.change.org/p/pierre-moscovici-a-unilateral-suspension-of-the-introduction-of-the-new-eu-vat-laws-for-micro-businesses-and-sole-traders

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    1. Hi Jo, I've now signed it and shared it on Twitter - thank you so much for mentioning it here.

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  3. I think that this new legistlation is ridiculous. I do get the reasoning behind it but I think that at the end of the day it seems to be aimed solely at recouping money from large buisnesses and doesn't give any thought to the number of smaller buisnesses that are going to go bust as a result of the changes. It is not only the sellers that are going to lose out but also all of us who buy online.

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  4. I agree, I think the reasoning behind it is admirable - I just think they'd missed the impact it would have on smaller businesses. Such a shame.

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  5. so sorry how this is affecting pdf pattern sellers. they just don't seem to have thought it through as now they are creating a monopoly for the big sellers like amazon that were the reason for the change in the first place! really hope they see sense!

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  6. I didn't know you were responsible for squeebles - we LOVE LOVE LOVE the spelling app - it has made weekly spelling tests a whole heap easier for me, I load them up and know that she can then practice them during the week

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    1. I'm so delighted that you and your children love our apps - the spelling app is my favourite too and I still even use it with our oldest child, who's now 13, when she's got words to learn in Spanish! Thank you so much for letting me know. x

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  7. I honestly don't see how this is going to be enforced. There are hundreds of thousands of small businesses out there selling patterns/ebooks/software etc. It's pretty obvious that practically no one in the US or Australia is even aware that this is about to occur. I have just spent half an hour trying to google articles written from an Australian perspective (i.e. how it would affect me) and there's nothing out there. If someone from the EU wants to come and try and arrest me here for the 3 patterns I've sold to the Netherlands then they can give it a try. As long as they extradite me to France, I'll be all for it ;)
    I understand what they are trying to do, and I also see that this is just the tip of the iceberg - this law is planned to extend to encompass ALL products, not just digital, in the near future. But oy, the headache of it all. Can they not think of how it's all going to work BEFORE they start issuing decrees?

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    1. It can't possibly be enforced fully, but they would only need to prosecute a few small businesses to make an example of what happens if you don't stick to it - it feels like too big a risk to take to me - but I am, admittedly, not a risk taker!

      Unfortunately, I think the reason why you may not have found a distinct Australian perspective on it is because it affects everyone, wherever they are, in exactly the same way. However, I think it's only countries that are in the EU or geographically close by that are taking it seriously at the moment. I think there's an element of 'we're nothing to do with the EU, so it shouldn't affect us'. Frustratingly, it doesn't work like that, but I think that may be the reason why Craftsy and Etsy have been so slow to act.

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  8. The EU is a monster. Started off to make doing business across borders easier it has mushroomed into an out-of-touch ogre that stops people from doing business. This is just a sympton to a horrible disease. It is their business to look at the legislation they make from all sides, they get paid more than enought (too much actually) to do so. Probably too busy spending their unending expense accounts, they are very good at that. So this is typical EU-stupidity.

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  9. I'm so sorry to hear that the legislation change has put you in this position, Florence. I'm hoping to continue selling PDFs, although I'm still waiting to hear back from my shop platform how I can comply with the country evidence requirement. It really does seem that many sellers - and selling platforms - especially outside of Europe, are unaware that this legislation applies to them - and their sellers - too. I agree with you that the EU had admirable intentions, and it's such a shame to see businesses such as yours ceasing trading because of the bureaucracy (and associated costs) involved. Fingers crossed there will be some kind of U turn so that digital selling won't suffer. It really seems like a step back in time :(

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    1. Thank you so much, Tilly. Good luck with getting your site sorted out, but in the meantime I've emailed you about a solution that may work for anyone selling dressmaking patterns. x

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  10. I just made a 3 bears sleeping bag for my work colleague's toddler last week! I admit, as a consumer it had spurred me on to make those pattern purchases I've been dawdling over! You won't be the only business halting sales - I do hope it's temporary for all of us!

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  11. I just tied to purchase the 3 bears sleeping bag and after I submitted my order to paypal, instead of being directed to the download page, a page came up that said I needed to check and see if the transaction had gone through. I got the paypal email stating that the transaction had gone through and on my paypal account it states the payment was made to you. Can you please send me the link to download the PDF (I can send you the transaction number if you wish). I was going to purchase the applique ebook but will wait until I hear from you.

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    1. Hi Karen, I'll email too, but that should be all sorted now and I've refunded your second payment! Thank you so much for buying my patterns. x

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  12. I had planned to start releasing some small PDF patterns in 2015 but now with these new tax laws I've decided against it. At first I was upset about this situation, but now I'm kinda taking it as a sign that I should be focusing on other things anyways so it's okay :)

    I completely sympathize with your decision to stop selling digital downloads. Hopefully other pattern selling platforms with come up with a solution quickly so you have the option to bring them back in 2015 if you choose. I've been watching the VAT drama unfold on Twitter and I'm so sad for so many small business out there. Such a tough situation. What can you do though I guess...

    Here's to a great 2015 no matter what!

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    1. Rochelle, I really wouldn't be put off yet - hopefully it will resolve itself. If it does, selling patterns is a really fantastic way of adding to your business by doing something you love. x

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    2. This platform deals with EU vat apparently

      http://www.vivebooks.com/designers-eu-vat-issues/

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  13. It's such a disaster! I can't quite believe the scale of the cock-up. And I had thought the 3rd party platform thing would solve the problem, so aaargh to that. My partner sells music (sheet music, not audio files) through a 3rd party site, so we'll have to investigate the implications... My understanding from Ysolda Teague's post about it was that they've realised this unintended consequence too late in the day for there to be any kind of u-turn or change in the legislation. I'm really pleased that they're tackling major tax avoidance/evasion but the failure to properly investigate the effects of the law is unforgivable.

    Such a shame you have to take your patterns down, Florence. Let me put in a personal recommendation of the Slouchy Make-up Bag - so perfect for Christmas presents! And the machine appliqué ebook is a brilliant resource too. x

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    1. Hello dear Nina, the problem with sewing patterns is that they need to be PDF to print out at the right size, however, if your partner sells sheet music, could he sell it as eBooks through Amazon (they deal with all the VAT for you, so he would have to do absolute nothing different)? I've no idea if you can print them out in any way from there, but it's an idea that might be worth looking into, perhaps. And what a lovely thing to produce. Does he write the music himself and what instruments does he play?

      And thank you for the pattern recommendations - you are kind. x

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    2. Interesting idea - thanks. But at the moment he does no marketing or anything, people just find him through the site because it's one of the main places you'd go to if you were looking for downloadable music. Yes, all his own stuff (original compositions and arrangements/transcriptions). Hopefully this site is one of the OK ones, though - the buyer pays the site, and then the site deducts a fee and passes the remainder on to the seller, and they are UK-based so should be aware...

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  14. This is the first time I've heard of this but it sounds like a drama for the online sewing world seeing just how many people are selling PDF patterns nowadays. Let's hope this issue will be fixed soon...

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  15. Wow I'm shocked to hear this. As Kirsty said we in Australia are quite oblivious to this. I really hope you're not the first of many to stop selling pdfs. I, like many others, rely on pdfs for patterns as they are so convenient in their almost instant (and free) delivery as well as being so easy to store. I really wish legislators would take the time and effort to see how their rulings impact on the little people. Hoping this gets resolved at some point and I see your pdf patterns return.

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  16. This is ridiculous, I have found the petition mentioned above ,signed,it tweeted and fb'd it!! If this is an attempt to stop the big business and their tax evasion loopholes it seems as usual they have taken a sledgehammer to crack a nut!! Here's hoping they change this very soon!!

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  17. The world just got a lot smaller. That's sad. With all this technology who would have thought that it would close more doors and take us back several steps instead of what we were all lead to believe it would do - bring the world to our fingertips and open doors of opportunity. It was good while it lasted. I live in Canada and I am just waiting for something like this to come here and shut even more doors and shatter the dreams and potential of so many creative people who can't possibly compete with the big corporations. Good luck to you and all the best.

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  18. I have made dozens and dozens of those bear beds. They are absolutely brilliant; the perfect gift for little ones! The pattern is brilliant! Anyone with any small children in their lives, boys or girls, should buy this pattern!

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  19. I am so upset to hear this news. I have only really gone back to serious sewing this year, and downloadable patterns have been a fantastic source of new and unusual ideas.

    I also feel upset for you and other digital sellers. This seems a ridiculous situation, which will leave small creative businesses with this dreadful dilemma. Surely with some of that creative thinking there must be a way round this.

    I do hope this will be resolved somehow, so you and others can continue sharing your wonderful talents. I have also just purchased your applique book, because this is something I want to try myself.

    Best wishes for a happy Christmas, and for better news in the New year!

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  20. This is a most unfortunate happening. I have been working hard over the last year in order to provide pdf patterns next year. My work is now wasted. It is currently the case that there are no workable solutions despite what HMRC thinks. It is just far too difficult, labour intense or just downright impossible to fulfil the conditions now required.

    We are all losers. Prices will go up by at least 20% to buy patterns from overseas e.g the US, or they just will not sell to us any longer. Sellers are closing shop right now. There are no winners.

    I couldn't agree with you more. If people do find a way to sell, it will be through large companies like Amazon who are the reason the new laws are being implemented. It also looks like homework was not done on how it affects so many small businesses.

    Not everyone has a fall back plan either. This is truly devastating for many for whom their business is their livelihood. I truly hope that a solution is found. Meanwhile the government has sabotaged business plans instead of encouraging the growth they profess to want. Still they will gain more overall from taxes paid and the little business will pay the real price.

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  21. In case this helps, this was the response from my local MEP about this:

    Thank you very much for your email regarding the payment of VAT on digital services and the new changes that are coming into effect on 1 January 2015. I am also responding on behalf of my Labour colleague for Yorkshire & Humber, Linda McAvan MEP.

    I completely understand why the introduction of these new changes is causing so much concern to micro businesses and individual online traders. My colleague Anneliese Dodds, who sits on the Economic and Monetary Affairs Committee of the European Parliament, leads for Labour on this issue. Anneliese taken the issue up with the UK government, HMRC, the European Commission, the Federation of Small Businesses, consumer organisations and others to get to the bottom of the problem.

    She has received some clarifications and assurances, which I hope will alleviate some of your concerns:

    *You will not need to become familiar with the individual tax regimes of all 28 EU Member States.* The whole purpose of HMRC's 'one stop shop' is to make life as easy as possible for small businesses and individual traders. If you continue to trade as you do now, then you can submit your sales figures to the one stop shop and it will calculate your VAT and present you with a single figure, in pounds sterling.

    *You will not need a VAT number in order to use the one stop shop.* I know that a number of businesses and traders have been concerned that they will need to register for a UK VAT number in order to use the one stop shop. I have spoken to HMRC and can confirm that this is not the case. Instead, you will simply be given a one stop shop registration number in order to use that service.

    *You will not have to pay VAT on your UK sales.* If you are below the existing UK threshold of £81,000 of sales in a year, then you are currently exempt from registering for and paying VAT in the UK. That exemption will remain for UK sales, even if you sell in other Member States. So while you will have to use the one stop shop and pay VAT on your European sales, your protection from VAT registration and payment in the UK remains.

    *You will have until 20 April 2015 to make your first returns.* Although the new EU law comes into effect on 1 January 2015, you have the first quarter of the year in order to make your returns to HMRC via the one stop shop. The one stop shop has been open for registrations since October, and you can continue to register into the new year.

    *If you trade through an online platform, like the App Store or Etsy, then you will not need to register.* If you do trade through such a platform, it is worth checking whether or not you need to register. A significant number of them will calculate the VAT for you, and you won't need to do anything.

    HMRC will answer questions. It has put a significant amount of information on its website here: https://www.gov.uk/government/publications/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop/vat-supplying-digital-services-and-the-vat-mini-one-stop-shop. You can also contact them via their Twitter account @HMRCcustomers, where they have recently held a Twitter surgery to help with people's questions and concerns.

    This is an important change at an EU level to make the tax system fairer, and to ensure that large companies do not have a major advantage over small businesses and individual traders like yourself by simply moving to wherever the tax regime in the EU suits them best. This kind of fairness in our tax system is something that Labour has been fighting for in Europe for a long time.

    That said, I appreciate that these kind of changes can bring major upheaval to smaller businesses and individual traders who do not have the systems in place to adapt easily to new regulations, unlike the bigger companies. I know that the Financial Secretary met representatives of micro businesses on December 3 to address their concerns, which does seem to be rather a late response as the new rules are due to come into effect in January 2015.

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  22. Re the above, do we still need to obtain 2 items of proof (always supposing we can get them), to show where the purchaser resides? We are then getting into data protection if we need to keep the information safely. How do we get our current selling platforms to allow us to get and therefore give this information? Etsy as yet has no plans it is telling anyone about. What about those businesses who currently trade on their own websites which is at the moment relatively simple to do. How do they get the software, how do they afford it, to gather the relevant info at the point of sale and charge the right amount etc.? I am sure the onus will still be on us to show proof that we have got the correct information. Also I have become aware today that from 2016 there are plans to roll out VAT across the board on all items sold, not just digital services. Small business looks to be increasingly untenable.

    Thank you very much Daisy for your above comment. It seems like they think all is rosier than it is and there are just a few minor hiccups.

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  23. Hiya Florence. I read your article with great interest and not a little sadness but interestingly I was speaking with my neighbour tonight about this issue and it turns out he works for a company that hosts digital sellers of apps and suchlike who are aware of the vat issue and sound like it's something they've been working on. He mentioned that there are a few knitting pattern sellers using the service so I'm passing the name to you in case it's something you'd like to check out: https://www.paddle.com
    Hope that's potentially of some help to peeps x

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  24. Hello Florence,
    Petition signed and forwarded to friends as well.
    Thank you so much for posting all this information and providing the space for discussion about it. I too was planning to make and sell patterns and ebooks this year, and hope it will still be possible. Best, Elle

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  25. Oh dear- how frustrating! I popped in today to finally buy the sleeping bag pattern I've intended to sew for my daughter's toy pups for ages. And it looks like I was just in time. I hope that things get worked out so you can offer your patterns into the future.

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Thank you so much for taking the time to leave a message - it's always really lovely to hear from people.

I now tend to reply within the comments section, so please do check back if you've asked a question or wish to chat.

Florence x

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