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VAT exemption codes
Thread poster: Victoria Burns

Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
Jan 11, 2008

Hi all,

As a freelance translator based in the UK I am not VAT registered as my annual turnover is below the threshold (approx. £63,000, I believe).
A client has now asked me to quote on his invoice a paragraph number from the UK VAT code by virtue of which I are exempt from charging VAT on my invoices.
Does anyone know what this might be or where I could find out?
Internet research has oonly turned up results regarding tax codes and VAT codes for those who ARE VAT registered.

Any help much appreciated.

TIA

Victoria


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Amy Williams  Identity Verified
United Kingdom
Local time: 13:52
Italian to English
+ ...
HMRC online VAT guide Jan 11, 2008

Hi Victoria,
There's a fair bit of info here (bit of a tired-looking website--you may have to call HMRC for updates): HMRC online VAT guide.
"2.1 When must I register for VAT?
You must register for VAT when the value of your:
(a) taxable supplies (see paragraph 1.5); or
(b) distance sales (see section 5); or
(c) relevant acquisitions (see section 6),
go over the current registration thresholds
(d) when you take over a VAT registered business as a going concern (but see paragraphs 1.12 and 2.8 for further information).

2.2 Registration Thresholds
For details of past and current registration thresholds please contact the VAT Excise and Customs Duties Advice Line on 0845 010 9000, or visit our web-site at www.hmrc.gov.uk"

Failing that, give them a call and they may be able to give you a paragraph. I think it's GBP 64,000 at the moment, but can't say for sure.

You don't need to look for a "VAT exemption code" as a) your services aren't (as far as I know) zero-rated and b) you're not over the threshold. You're just not VAT registered.

Hope that makes sense!
All the best and have a good weekend,
Amy

PS - am by no means an authority on this...!

[Edited at 2008-01-11 15:28]


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Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
TOPIC STARTER
Thanks so much! Jan 11, 2008

That's excellent, Amy, thanks ever so much!

I'll see where I get to with that link.

Cheers!


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Charlie Bavington  Identity Verified
Local time: 13:52
French to English
EU legislation? Jan 11, 2008

Is the client French?

Do we have a "VAT code" as such? (in the sense of codified rules, not a VAT number, I know we got them!)

Anyway, the point is that even if you were registered, you wouldn't charge VAT to EU (non-UK) customers, as it is a cross-border service and therefore either exempt or zero-rated, I forget which, the point is VAT is not charged. Look up the EU legislation and quote chapter and verse.

If they are a UK customer, then ....nah, it's gotta be a foreign client

[Edited at 2008-01-11 16:15]


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Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
TOPIC STARTER
Yep! Belgian! Jan 11, 2008

You're right there Charlie. It thought it was odd, too, as I used to work in export sales and I know we never charged VAT to French customers then.
I'll check out the EU stuff in case anything there is relevant.

Thanks a lot!


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xxxJPW  Identity Verified
Local time: 13:52
Spanish to English
+ ...
VAT NIGHTMARE Jan 11, 2008

Victoria -

the website and phone number that Amy supplied above are perfectly valid; also, the threshold she quoted is still in force: 64 thousand for the current tax year.

VAT is a nightmare, it still gives me the creeps from my trainee lawyer years, now all but a distant memory; but the essential thing to remember is that if you know OR EVEN THINK you might be approaching this 64K limit then you are obliged to register.

My advice: stay far away from it!! You only end up as a tax collector (unpaid and overworked, and they don't even say thank you).

If I personally were approaching this 'magic' figure, I would stop working for the rest of the year....


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Parrot  Identity Verified
Spain
Local time: 14:52
Member (2002)
Spanish to English
+ ...
Oops Jan 12, 2008

Victoria Burns wrote:

A client has now asked me to quote on his invoice a paragraph number from the UK VAT code by virtue of which I are exempt from charging VAT on my invoices.
Does anyone know what this might be or where I could find out?
Internet research has oonly turned up results regarding tax codes and VAT codes for those who ARE VAT registered.


I think you've got the idea upside-down. In transactions between EU member states, it is the buyer who's not supposed to pay seller-country VAT (i.e., your client is British VAT-exempt) if he fulfils several requirements (basically, just VIES database-registered as far as you're concerned IF you collect VAT).

Since you don't collect VAT anyway, what VAT code do you have to cite? Does he need that paragraph to pay seller-country VAT?


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Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
TOPIC STARTER
To John Jan 12, 2008

I totally agree with you John - what's the point in working your a** off and being no better off for it? I certainly do intend never to have to register for VAT.
I just don't see why I need a 'coded reason', so to speak, for not registering. Anyway, I have now sent the invoice, stated on there that it is exempt from UK VAT and explained my reasons to the client. As far as I'm concerned I can't do any more than that.

Thanks for your comments!

Victoria


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Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
TOPIC STARTER
To Parrot Jan 12, 2008

Hi Parrot,

I understand what you're saying, but from what my client has said to me, it's definitely a code relating to my reason for not registering for VAT that he's after.
I have now sent the invoice anyway, stating that it is UK VAT exempt, and explained to my client my reasons for this. As far as I'm concerned that's all I can do - I've never had to supply a code like this before and had no problems.

Many thanks for your comments - I'll bear this in mind for the future.

Have a good day,

Victoria


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Williamson  Identity Verified
United Kingdom
Local time: 13:52
Flemish to English
+ ...
VAT Notes Jan 12, 2008

Have a look at : http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD_008650&propertyType=document
Supplement to notices 700/1 and 700/11 : Should I register for VAT. The current treshold of £64,000 and
3. Registration limits: distance selling
3.1 Current threshold
The current distance selling threshold is £70,000/ 92,679.6 euros
It is based on sales made during a calendar year from 1 January to 31 December.

The Belgian and French VAT-treshold of 5000 euros can hardly be called a treshold. Which is why having these notices as shortcuts comes handy if you work for those countries.

Contrary to the meaning of some, VAT is no sign of professionalism, entails paperwork and if you make a small mistake you get fined. The disadvantages outweigh the advatages, which is why I prefer not to opt in if I can legally avoid it.



[Edited at 2008-01-12 20:49]


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Ralf Lemster  Identity Verified
Germany
Local time: 14:52
English to German
+ ...
Don't forget input tax Jan 12, 2008

Hi Victoria,
I totally agree with you John - what's the point in working your a** off and being no better off for it? I certainly do intend never to have to register for VAT.

Aren't you ignoring input tax? As a VAT-registered business, you can deduct VAT paid on business expenses - to me, this is a significant benefit of being registered. Depends on the amount of expenses you have, of course.

I just don't see why I need a 'coded reason', so to speak, for not registering.

Because your customer might be liable for VAT in their country if such a note is missing.

Anyway, I have now sent the invoice, stated on there that it is exempt from UK VAT and explained my reasons to the client. As far as I'm concerned I can't do any more than that.

As far as I can see, the legal basis is Schedule 1 to the Value Added Tax Act 1994, in conjunction with the Value Added Tax (Increase of Registration Limits) Order 2007.

Here's what one of the providers I work with quote on their invoices:

You are required to account for VAT at your domestic rate on the value of these consultancy services using the 'reverse charge' procedure. This is in accordance with Article 21(1)(b) of the EC Council Sixth VAT Directive (77/388/EEC).


HTH
Ralf


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Charlie Bavington  Identity Verified
Local time: 13:52
French to English
Clarification Jan 12, 2008

Victoria Burns wrote:

A client has now asked me to quote on his invoice a paragraph number from the UK VAT code by virtue of which I are exempt from charging VAT on my invoices.
Does anyone know what this might be or where I could find out?


I may not have been clear enough before, or made assumptions I should not have made.
Certainly in France, which in my experience means there is a strong possibility something similar applies in Belgium too, if you are not charging VAT on your invoices, you have to quote chapter and verse as to the reason. That is to say, you need a line on there somewhere saying "not subject to VAT persuant to Article xyz of the General Tax Code".

My guess (and it is a guess, to be honest) is that he was hoping to see something similar, not realising, perhaps, that we don't have a codified system that works in quite that way.
Ralf's suggestion (which I had not seen when I started this post!) seems excellent, if you quote EU directives, then everyone should be happy

[Edited at 2008-01-12 13:15]


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juvera  Identity Verified
Local time: 13:52
Member (2005)
English to Hungarian
+ ...
VAT year Jan 16, 2008

Williamson wrote:

It is based on sales made during a calendar year from 1 January to 31 December.


That is the first time I came accross anybody mentioning calendar year as a base period for VAT.

Without going into too much detail, the usual method of assessing the necessity of registering for VAT is simply any 12 month period, in which the thresold is reached. So if you suspect that you may reach it, watch it, even if it is June or July!
The VAT year itself is decided for you after registration.
"It’s fast approaching the end of everyone’s VAT year (March, April or May depending on the stagger of VAT returns) ..."
One thing is sure, it is not 31. December.


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Vicky James
United Kingdom
Local time: 13:52
French to English
French VAT threshold query Jan 16, 2008

Sorry, but can anyone confirm this €5000 threshold previously mentioned? I am a profession liberale and have been told that the earnings threshold for VAT is €27,000 (as it has been apparently for many years!)

If I am right, has anyone any ideas as to how to absorb this into their rates? Are agencies used to paying translators who charge VAT? If I started to charge VAT now I fear that I would probably become less competitive.


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Victoria Burns  Identity Verified
United Kingdom
Local time: 13:52
Member (2007)
French to English
+ ...
TOPIC STARTER
UK VAT threshold Jan 16, 2008

Hi Vicky,

I checked out some of the links provided in above posts and the UK threshold is £65,000 at the moment, i.e. you can turnover upto that amouth per year without having to register with VAT. If you've been working to a lower threshold anyway then you certainly don't have anything to worry about, and can even turnover a lot more per year without having to register for VAT (IN UK - not sure how it works in France, sorry)

Hope this helps

Vicky


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