VATupdate Newsletter Week 49 2024

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SKINS

If you’re selling second-hand cars, you might be familiar with the so-called margin scheme. This handy little VAT rule means you only calculate and pay VAT on your profit margin—not on the total sales price. It’s like finding a parking spot right in front of the shop: a small victory, but it feels great.

The margin scheme isn’t just for cars. It applies to second-hand goods, works of art, collector’s items, or antiques. People have been using it to trade wine, clothes, and even horses. Yes, horses. The resale market for practically everything is booming. But here’s where it gets fun: can this scheme apply to virtual goods, like ‘skins’ in online video games?

For the uninitiated, skins are digital designs used to customize your video game character. Fancy armour, neon suits, or a chicken costume—whatever helps you conquer dragons and fashion critics. These skins can be traded between players and selling them can be surprisingly profitable. After all, even in the virtual world, people want to look their best. And why wouldn’t they? No one wants to slay a boss looking like they just rolled out of bed.

Now, here’s the rub. Buying a video game is considered a service for VAT purposes. Gone are the days of buying DVDs (or CD-ROMs, for those who remember dial-up) and loading them into your PC. These days, it’s all about downloading or streaming, so there’s no physical “good” involved. This means buying an add-on, like a skin, is also treated as a service. And here’s the catch: the margin scheme applies only to goods. No love for digital fashionistas in the VAT world.

Selling second-hand video games on DVDs? Sure, that could fall under the margin scheme. But what if that DVD comes with an account where the character is already maxed out and strutting around in premium skins? How much would that fetch on eBay? It’s like buying a second-hand car with a trunk full of gold bars—there’s value, but it’s not in the wheels.

As we march into the future, the line between goods and services continues to blur. Watching TV, driving cars, and even gaming are shifting to service models. Who knows? In a few years, we might not own anything at all—just rent, lease, or borrow everything. Imagine renting a virtual sword for your avatar, only to find it comes with a monthly subscription fee. The only thing more terrifying than a zombie horde is unexpected VAT on your virtual purchases.

Stay tuned to VATupdate for more insights, laughs, and updates from the ever evolving (and occasionally absurd) world of VAT!

If you have any comments, questions, or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.

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