As I write this post we are only 9 days away from the vote which will decide whether Scotland becomes an independent country, or whether it stays within the United Kingdom with a higher degree of Home Rule. And no, I don’t intend to tell you which way I will vote, as both sides have ardent members who are quite capable of forming a lynch mob!
There have been many discussions on the pros and cons of either vote, but there has been nothing that I can see on the outcome of the tax situation for independent writers who publish their books through the Amazon KDP, or Createspace services, or Smashwords, or any other publisher/distributor.
The simple answer is, of course, that in the event of a ‘No’ vote, things will stay as they are, and that in the event of a ‘Yes’ vote we will pay our taxes to an independent Scotland. Simples.
However, ebooks and paperbacks sell worldwide, therefore we are liable for tax in other countries, mainly the US. At present, if writers pay tax in the UK they can apply for exemption of US tax, which is set at 30%, by filling in the relevant forms to apply for an ITIN (Individual Taxpayer Identification Number), which is similar to the British National Insurance Number, or an EIN (Employer Identification Number) if you are registered as a small business. Once these tax numbers are allocated the US withholds any tax due on sales so UK writers’ earnings are not subject to US tax.
It would be foolish to think that this situation would continue if Scotland were no longer part of the UK, because in order to acquire a US tax number, the person applying has to be paying tax in a country with which the US has a tax treaty. Now, the current tax treaty is with the UK, therefore where would that leave an independent Scotland?
If Scotland becomes an independent country it would no longer be part of the UK, and would therefore have no tax treaty with US. No doubt a tax treaty could be set up, provided both parties were willing! But how long would that take? The wheels of political change can turn exceedingly slowly, and I am sure there will be more pressing issues that have to take priority.
Another issue that has been plaguing my mind, is the situation where the UK tax authorities will remove tax from source on all UK sales, which means paying tax to the UK and to Scotland, and don’t think that’s not a possibility. A friend of mine who sells in Europe (Germany, Spain etc) goes through agonies trying to sort out tax issues that arise. I don’t know the details but I think she pays tax in the country where sales are made and then has to claim it back from UK tax – I may be wrong in the detail, but I do know it is always an agonising time for her.
My head hurts with all this thinking about tax implications, so I’m going to leave you now, and if you have any insights on how it is all going to work, maybe you could leave a note in the comments.