The media and tech landscape: A VAT perspective

Our recent survey of 200 media and tech business leaders revealed a series of insights into the sector’s prospects over the next 12 months. 

This article highlights some of the headlines from this survey and considers the VAT issues that might arise as a result. 

UK beats US for fund-raising, but care on VAT is required… 

You would be forgiven for thinking that, following the decision of several well-publicised UK companies to list abroad, the UK investment community may not be considered the right audience for media and technology businesses.

However, our survey found that 53% of the businesses considering listing think the UK is a more favourable location to raise capital than the US. Only 15% state a preference for the US, with the remainder on the fence.

Location aside, fund-raisers can face significant professional fees to ensure the market understands their proposition and the correct legal and governance structure is in place. 

Businesses must ensure there is no unnecessary VAT cost associated with these fees. We advise thorough consideration of VAT as early in the process as possible, to avoid it being overlooked as the date of the fund-raising approaches, and work becomes more frenetic.

UK government supportive, but HMRC VAT challenges increasing

Over three-quarters of respondents felt that the government’s policies were supportive of the sector. While the reasons for this sentiment are not clear, we expect that successive UK governments’ support for R&D tax reliefs, along with sensible (but certainly not extravagant) investment in fibre infrastructure could explain this position. Of course, a looming general election and a tough economic environment mean that all the parties’ manifestos should be carefully inspected.

A recent Freedom of Information (FoI) request suggests that HMRC VAT audit activity, and subsequent challenges, have significantly increased this year. And so, while overall policy might be supportive, HMRC remains focused on tax collection. In addition, well-publicised delays in critical administrative functions, such as VAT registration and grouping applications, create significant problems for some businesses.

Waiting until an HMRC visit to conduct a review of your VAT position is often too late and puts you at risk of financial penalties. Therefore, the sooner action is taken to review your VAT accounting position the less likely that an HMRC visit will lead to unpleasant surprises.

Paris leads the way for European expansion, but e-invoicing adds complexity

Despite the headwinds some businesses are experiencing, international expansion remains a key priority for many. Our survey suggests that Paris and Berlin are favoured for European expansion due to their talent pools and access to funding. 

If you are considering these countries, preparing to comply with local VAT considerations should feature in your process. France will introduce a phased approach to mandatory e-invoicing and e-reporting for most French businesses.

At an EU-level, a package of VAT law changes referred to as the VAT in the Digital Age reforms also include e-invoicing proposals along with changes in the place of supply rules and gig economy reforms.