The Commission has launched an investigation into whether crowdfunding should be liable to EU VAT. If the Commission concludes that it should, a large number of UK projects will face a 20% VAT liability on investor returns.

The Commission is particularly concerned with the very popular “rewards crowdfunding”, whereby investors contribute funds in return for products or services to be developed, usually as a result of the fundraising. These rewards projects can include, for example, films, albums, or software development, which are offered free, or at a reduced rate.

The Commission is also considering whether crowdfunding ought to qualify as a financial service under the EU VAT Directive. If it concludes that it should not, then intermediary services offered by many crowdfunding platforms will become liable to VAT.

Echoing the approach taken in recent reviews of the VAT treatment of bitcoins and other forms of digital currency, the Commission has now referred the question of crowdfunding to the EU VAT Committee.