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UK to End Tax Loophole on Digital Download Sales

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The cost of digital downloads in the UK is set to rise after the government decided to review how values added sales tax is calculated.

At the moment, VAT is calculated at the rate where the sale takes place, which for the UK often means sales being processed in countries such as Luxembourg, where VAT rates are lower.

The change will see retailers of digital content required to charge for VAT based on where the buyer lives -- and that will see most consumers paying the higher UK sales tax.

The move has been welcomed by UK businesses who faced being priced out of the market by multi-national companies that were able to operate in foreign countries, but had sales within the UK. Example companies include Amazon which routes most of its sales through Luxembourg.

The UK government expects to see an additional £300 million in taxes from sales calculated locally, while local retailers expect to benefit from a flatter competitive market.

However, consumers will see prices rise as the higher sales tax comes into effect, from January 2015.

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Tags: UK