Following the latest budget, prices for downloading apps, music and other items could rise.
Hidden away in George Osbourne’s recent budget speech was a change in the way companies such as Apple with iTunes and Amazon work. Both have their European headquarters in Luxembourg where taxes are lower than the UK and many other European nations. The reason for doing this is because by buying items from a company based in Luxembourg the purchaser only pays Luxembourg’s lower level of tax, not the UK’s much higher level.
However, George Osbourne has said that from 1 January 2015 this will no longer be the case. From next year the cost of downloads from iTunes and other things from Amazon will have to include UK VAT, currently at 20 per cent.
The budget document said: 'As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.'
This higher rate of tax could well mean that apps, music and films that are downloaded in the UK from iTunes and sites such as Amazon will end up costing more. The idea behind the move though is to reclaim as much as £1.6 billion in VAT, the estimated amount that the UK treasury is thought to have missed out on, under the current arrangement, in 2012.