New tax rules from the EU mean businesses creating and selling apps, video downloads and ebooks to consumers will have to start charging VAT from next year.

Accountants at James Cowper, a firm based in the Thames Valley, said the changes will go live on 1 January 2015 under ‘Place of Supply’ rules, meaning VAT is charged at the local rate where the purchaser is buying from.

To help businesses comply with the new rules, the UK government has introduced a new system requiring businesses to submit a separate VAT return and pay the tax every quarter.

The return will record the value of supplies to consumers in each EU member state and the amount of VAT due on these supplies at the local VAT rate.

Ruth Corkin at James Cowper said UK businesses selling an app to a customer in Luxembourg will need to charge 15 per cent VAT, but 27 per cent to someone living in Hungary because of the different tax rules in each country.

“There are 28 countries in the EU with 30 different VAT rates; this creates a high administrative burden, plus enormous potential for mistakes,” she said.

Adding to the complexity, the rules affect popular app platforms in different ways. Apple’s app store is defined as a marketplace, meaning Apple is liable for the tax, while Google Play acts as an agent taking commission, making the business liable for payment.

“A business selling the same App from both Apple’s App Store and Google Play will have to account for VAT in completely different ways,” said Ms Corkin.