I have spent a lot of time recently looking at this, but have not found a satisfactory solution so far.
We have disabled the “Buy Now” buttons on the website, so purchases cannot be made using the automated method. It is still perfectly possible to purchase software licences from us by simply sending a request email. The transaction and licence code generation is then handled entirely manually, though continues to use PayPal and email delivery as previously. We are told this falls outside the scope of the new rules so no VAT is applied and our prices are unchanged.
Unfortunately, the unavailability of the fully automated and easy “Buy Now button” method appears to put people off and sales since January 1st have dramatically fallen.
Advice from the HMRC is that we should register for VAT and their VATMOSS scheme. But after looking carefully at the administration, record keeping and technical changes – this is just not viable for us. Our operation is far too small and it would not make any sense!
We continue to assess other options. It may be that we will be forced to separate out sales to the EU (other than UK) and either handle them differently or dis-allow sales to those countries.