What Licences Do You Need for In-App Purchases?

A cleaning services company launches a booking app with a simple add-on feature—users can purchase extra services like carpet cleaning or window washing right from their phone. Within weeks they're processing hundreds of transactions. Then the emails start arriving from their payment processor, asking about business licences and VAT registration. The founders hadn't thought about any of this; they just wanted to make it easier for customers to book services.

Here's the thing—in-app purchases sound simple on the surface but there's actually quite a lot going on behind the scenes from a legal and regulatory standpoint. I mean, you're essentially setting up a digital shop inside your app, and just like a physical shop needs certain permits and licences to operate, your app does too. The tricky bit? The rules vary depending on what you're selling, where your users are located, and which payment systems you're using.

Getting your licensing right from the start saves you from headaches down the line, and trust me, those headaches can be expensive ones.

I've seen apps get pulled from the App Store because they didn't have the proper documentation in place. I've watched businesses get hit with back-taxes they didn't know they owed. And honestly, its not because these founders were trying to cut corners—they genuinely had no idea what was required of them. The mobile app world moves fast and the regulations haven't always kept pace, which means there's a lot of confusion about what's actually needed.

This guide breaks down exactly what licences and registrations you need when you're adding in-app purchases to your mobile app. We'll look at payment processing requirements, tax obligations, age ratings, data protection rules and the platform-specific requirements that Apple and Google enforce. By the end you'll know what boxes you need to tick before you go live.

Understanding In-App Purchase Regulations

Right, so here's the thing—when people think about adding in-app purchases to their mobile app, they usually focus on the technical side of things. How do I integrate Apple's payment system? What about Google Play billing? But what they often miss (and this catches out so many developers) is the regulatory side of things. And honestly, its a bit of a minefield if you don't know what you're looking for.

In-app purchases aren't just a feature you switch on; they trigger a whole set of legal requirements that vary depending on what you're selling, where your users are located, and how you're processing payments. I mean, the regulations exist for good reasons—they protect consumers and ensure fair trading practices—but they can be complex to navigate.

What Counts as an In-App Purchase?

Before we get into the regulations themselves, we need to understand what actually qualifies as an in-app purchase. It's not always obvious, you know? Here's what typically falls under this category:

• Digital content like extra levels, premium features, or virtual currency
• Subscriptions for ongoing access to services or content
• Physical goods ordered through your app (different rules apply here)
• Services like consulting sessions or bookings
• Unlocking ad-free experiences or removing limitations

The Regulatory Framework

The regulations you need to follow depend on several factors. Your apps location matters—selling to UK users means following UK consumer protection laws, selling to EU users adds GDPR considerations, and US states each have their own requirements. The type of purchase matters too; subscription services face stricter rules than one-off purchases, and anything involving real money gambling requires specific gaming licences. But here's what catches people out—even virtual currency in games can trigger financial regulations if users can cash it out or trade it. I've seen apps get pulled from stores because developers didn't realise their virtual economy counted as a payment service under local laws.

Payment Provider Licensing Requirements

Right, lets talk about payment providers—because this is where things get a bit complicated, and honestly, its an area where I see a lot of confusion. When you're setting up in-app purchases, you're not actually handling the money yourself in most cases; Apple and Google take care of that through their own payment systems. But here's the thing—if you want to offer alternative payment methods or if you're dealing with certain types of digital goods, you might need your own payment processing licence.

The rules vary massively depending on where your business is registered and what you're selling. In the UK, if you're just using Apple's App Store or Google Play's built-in payment systems, you dont need a separate payment licence because they're already licensed payment institutions. They handle all the card processing, refunds and chargebacks on your behalf. Its one less thing to worry about, which is nice.

But—and this is important—if you want to process payments outside of these systems (which some apps do for subscriptions or physical goods), you'll likely need to register as a payment service provider or work with a licensed payment processor. This means either getting authorised by the Financial Conduct Authority in the UK, or partnering with someone who already is. The FCA registration process isn't quick or cheap; it can take months and costs several thousand pounds in application fees alone.

Common Payment Licensing Scenarios

Here are the main situations where you need to think about payment licensing:

• Offering alternative payment methods outside the app stores official systems
• Processing recurring subscriptions through your own payment gateway
• Selling physical goods or services that require direct bank transfers
• Operating in financial services where you hold customer funds
• Providing digital wallets or stored value within your app

Most apps can avoid payment licensing headaches entirely by sticking with Apple and Google's native payment systems. Sure, you'll pay their commission (15-30%), but you save thousands in licensing costs and months of regulatory paperwork.

One mistake I see regularly? Apps that try to bypass the official payment systems to avoid commission fees, only to get rejected during app review or—worse—removed from the stores after launch. Both Apple and Google have strict rules about this, and they're getting better at catching violations. If your app sells digital content or features, you generally must use their payment systems. There are some exceptions for things like ride-sharing or food delivery, but these are clearly defined in each platforms guidelines.

VAT and Tax Registration Obligations

Right, let's talk about tax—because nothing says "fun app development" quite like tax obligations! But here's the thing, getting this wrong can land you in some serious trouble with HMRC or tax authorities in other countries. I've seen developers completely blindsided by tax requirements they didn't even know existed.

When you sell digital goods through in-app purchases, you're running a business. Simple as that. And businesses need to handle tax properly. In the UK, if your turnover exceeds £85,000 in a 12-month period, you need to register for VAT—there's no way around it. But heres where it gets interesting; when you sell digital products to customers in other countries, different rules apply. The EU has something called the VAT MOSS scheme (Mini One Stop Shop) which lets you report all your EU sales through a single portal rather than registering in every country separately. Trust me, you want to use this.

Key Tax Obligations for App Developers

• Register for VAT once you hit the threshold or if you're selling primarily digital goods in the EU
• Keep detailed records of all transactions, including customer location data
• Charge the correct VAT rate based on where your customer is located (not where you are)
• File VAT returns quarterly and pay what you owe on time
• Consider getting an accountant who understands digital services—its worth the investment

Apple and Google do handle some of this for you depending on your setup, but you're still responsible for understanding your obligations. Different app stores have different policies about who collects and remits VAT. Sometimes they do it, sometimes you do it—it varies by region and product type. You need to check the specific rules for each platform you're selling on because getting caught out later is expensive and stressful.

And look, I know this stuff isn't exciting. But spending a few hours understanding your tax obligations now can save you thousands in penalties and back taxes later. Get proper advice early on.

Age Rating and Content Licences

Right, so this is something that catches a lot of developers off guard—age ratings aren't just a formality you tick off when submitting your app. They actually have legal implications, especially when you're selling digital content or in-app purchases. Both Apple and Google require you to self-classify your app's content, but here's the thing—if you get it wrong, you could face removal from the app stores or worse, regulatory fines.

The age rating you choose directly affects what kind of content you can sell through in-app purchases. If your app is rated for children (typically under 13), you're subject to much stricter rules. In the UK, you need to comply with the Age Appropriate Design Code, which means you cant show targeted advertising to kids, you need parental consent for data collection, and your in-app purchases need additional safeguards. I mean, its not just about being ethical here—its the law.

When You Need Content Licences

If you're selling specific types of content through your app, you might need additional licences. Music streaming? You need licences from PRS for Music and PPL in the UK. Video content? That depends on what you're showing and whether its user-generated or professionally produced. Games with gambling mechanics (even if its just virtual currency) might trigger gambling licences depending on how your system works—and trust me, the regulations around loot boxes have gotten really strict in recent years.

Age ratings aren't suggestions; they're legal classifications that determine your entire compliance framework for in-app purchases and content distribution

The key is to classify your content honestly before you launch. Don't try to game the system by rating your app lower than it should be just to reach a wider audience. The app stores review actual content, users report violations, and regulatory bodies do sweep audits. Getting it right from the start saves you from having to retrofit compliance later, which is honestly a nightmare I wouldn't wish on anyone.

Data Protection and Privacy Compliance

Right, so here's where things get a bit serious—and honestly, where I've seen a lot of developers trip up over the years. When you're handling in-app purchases, you're collecting user data, and that means you need to comply with data protection laws. GDPR in Europe is the big one, but there's also CCPA in California and loads of other regional laws that affect how you collect, store and use customer information.

The thing is, most people don't realise just how much data they're collecting through in-app purchases. You've got names, email addresses, payment information (even if its tokenised), purchase history, device identifiers...the list goes on. And every single bit of that data needs to be handled properly or you could be looking at some pretty hefty fines. I mean, GDPR violations can cost up to 4% of your annual revenue or €20 million, whichever is higher. Bloody hell, right?

What You Actually Need to Do

Here's the practical stuff you need sorted before you start taking payments through your app:

• Register as a data controller with your local data protection authority—in the UK thats the ICO
• Write a clear privacy policy that explains exactly what data you collect and why (and it needs to be readable, not full of legal nonsense)
• Get proper consent from users before collecting their data, especially for marketing purposes
• Implement data retention policies so you're not keeping customer information forever
• Set up processes for users to request their data or ask you to delete it
• Make sure your payment processor is compliant too—you're still responsible even if they're handling the actual transactions

And look, I know this sounds like a lot of admin work, but trust me, sorting this out properly from the start is way easier than dealing with complaints or investigations later on. Plus, being transparent about data handling actually builds trust with your users, which can improve your conversion rates anyway.

Financial Services Licensing for Digital Goods

Right, this is where things get a bit tricky—and honestly, its something a lot of app developers get completely wrong. If you're selling digital goods through in-app purchases, you might think you're safe from financial services regulations because you're not a bank or a payment processor. Not quite. The moment you start handling real money for digital content, you need to understand whether your business model requires any financial licensing. I've seen apps get pulled from stores because they didn't realise they needed proper authorisation, and it's not pretty.

Here's the thing; if you're just using Apple's or Google's payment systems to sell things like extra lives in a game or a premium subscription, you're generally fine. The app stores handle the regulated bit. But—and this is important—if you're doing anything that looks like money transmission, storing value, or facilitating payments between users? You might need to register as a payment institution or electronic money institution. This applies to things like wallet apps, peer-to-peer payment features, or any system where users can cash out real money. The regulations vary by country but in the UK you'd be looking at FCA registration which isn't cheap or quick.

Common Scenarios Requiring Licensing

Let me break down when you actually need to worry about this. If your app does any of the following, you need to speak with a financial services lawyer before you launch:

• Users can transfer money to other users within your app
• You store monetary value that users can spend later (digital wallets)
• Users can convert in-app currency back into real money
• You're facilitating trades or exchanges of items with real-world value
• Your app acts as a marketplace where sellers receive payments

The penalties for getting this wrong are serious. We're talking fines, criminal liability in some cases, and definitely getting kicked off the app stores. Even if you think your app is borderline, get proper legal advice early on—it's much cheaper than fixing it later when you've already built everything and launched to users.

If your app involves any feature where users can receive, store, or transfer real money value (not just spend it), consult with a financial services lawyer before you start development. The cost of compliance is always less than the cost of non-compliance.

Platform-Specific Requirements and Rules

Right, so here's where things get a bit specific—and honestly, this is where I see a lot of developers trip up. Apple and Google each have their own rulebooks when it comes to in-app purchases, and they don't mess about when it comes to enforcement. Break their rules and you'll find your app rejected or worse, pulled from the store entirely.

Apples guidelines are pretty strict about what you can and cant sell through in-app purchases. Physical goods? No. You need to handle those through your own payment system. Digital content consumed within the app? Absolutely—that has to go through Apple's payment system, and they'll take their 30% cut (15% if you qualify for their small business programme). You can't even mention alternative payment methods in your app. I mean, you literally cannot add a button that says "buy this cheaper on our website"—Apple will reject it.

Google Play has similar rules but they're slightly more flexible in some areas. They also take their commission (same percentages as Apple) and require you to use their billing system for digital goods. But here's the thing—Google's enforcement hasn't always been as rigid as Apples, though that's changing as theyve tightened things up.

Both platforms require you to clearly display what users are buying, what the price is, and how subscriptions work (including how to cancel them). Its not optional. You need proper purchase confirmation flows; you need restore purchase functionality; you need to handle refunds according to their policies. And if you're selling subscriptions, you need to give users an easy way to manage and cancel them—burying that option three menus deep won't fly.

Conclusion

Right, so we've covered a lot of ground here—and I mean a lot. VAT registrations, payment provider agreements, data protection laws, age ratings, and all those platform-specific rules that Apple and Google throw at us. Its enough to make your head spin, honestly. But here's the thing: getting your licensing sorted properly isn't just about following the rules (though that's obviously important); its about protecting your business and building something sustainable.

I've seen too many apps run into trouble because someone assumed they didn't need a proper licence or thought they could figure out tax obligations later. That approach rarely ends well. The costs of getting it wrong—whether thats App Store rejection, legal penalties, or having to refund customers—are way higher than just doing it right from the start. And trust me, fixing licensing issues after launch is a nightmare compared to setting things up properly beforehand.

The good news? Once you understand what's actually required for your specific situation, the process becomes much more manageable. You don't necessarily need every single licence we've discussed—it really depends on what you're selling, where your users are located, and how you're processing payments. A simple app selling digital stickers has very different requirements than one offering financial advice or gambling features.

My advice: start with the basics (payment provider agreement, VAT registration if needed, privacy compliance) and then layer on any industry-specific licences that apply to your app. Work with professionals when things get complicated—accountants who understand digital sales, lawyers who know mobile commerce. Yeah, it costs money upfront, but it saves you so much hassle down the line. Build your app on solid legal foundations and you'll sleep better at night knowing everything's sorted properly.