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Voluntary VAT registration in the UK?
Thread poster: Daniela Gieseler-Higgs

Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
Aug 27, 2010

Hi everyone,

I'm picking up on on the subject of the EU VAT legislation that has been introduced on 1st January 2010 and the potential consequences for translators in the UK. The subject has been dealt with before in the following thread: http://www.proz.com/forum/money_matters/153466-eu_vat_changes_as_of_1_jan_2010-page5.html.

So far I haven't been registered for VAT in the UK as I'm well below the current annual threshold of GBP 70,000. As some of my EU clients require a VAT number to be able to work with me I'm facing a choice of either losing some of my clients or voluntarily registering for VAT with all the bureaucracy that entails.

I'm not quite sure what to do, so I would like to ask some fellow translators in the UK who may have faced the same problem what they have done and what there experiences are. For those who are VAT registered I would like to ask you if doing VAT returns and EU sales lists is really as much of a hassle as everybody, including my accountant, is trying to tell me, and how much time it takes to do. And has it caused any problems with UK clients if you suddenly start charging VAT?

Any information would be greatly appreciated!

Kind regards
Daniela


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Tom in London
United Kingdom
Local time: 21:36
Member (2008)
Italian to English
not required Aug 27, 2010

Daniela Gieseler-Higgs wrote:

So far I haven't been registered for VAT in the UK as I'm well below the current annual threshold of GBP 70,000.....some of my EU clients require a VAT number to be able to work with me


Daniela, you are only required to comply with UK tax law. Not with what your non-UK clients tell you. Many non-UK accountants are trying to force us UK-based translators to get a VAT code because it will make life easier for them. Don't do it ! My Italian clients are still paying me in the usual way.

In June 2010 I became concerned about this so asked my accountant the following question:

QUESTION

My self-employed activity consists of [...] translation work from Italian to English.

I provide some of my translation services to clients who are based in Italy. I carry out these translations here in the UK and invoice from the UK.

My turnover does not reach the VAT threshold of £70,000.

So far I have never been registered for VAT, and I do not apply VAT to my invoices.

Is this correct, or are there now new rules that would require me to be registered for VAT because some of my clients are based in another EU Member State?

ACCOUNTANT'S REPLY

The need to be VAT registered is normally a turnover based question. Therefore, any individual with self-employed income below the current threshold of £70,000 need not register, regardless of the nature of his activities.The fact that you have clients in other EU member states is not relevant in these circumstances. Therefore, what you are doing at present is correct.

END OF STORY

[Edited at 2010-08-27 10:06 GMT]


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Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
TOPIC STARTER
@Tom Aug 27, 2010

Hi Tom,

thanks for your reply. I know what the legal requirements are, but the reality is that a good client in Spain has just told me that they won't be able to work with me any more unless I provide them with a VAT number. So ultimately it is MY problem...

I wouldn't hesitate a moment to stop working for that particular client and let things lie, if I was sure that the issue would end there and then, but there's no point in doing that if, in a few months, the next agency wants my VAT number.

Daniela


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Sabine Braun  Identity Verified
United Kingdom
Local time: 21:36
Member (2006)
English to German
+ ...
Agree with Tom Aug 27, 2010

Hi Daniela,

I had the same problem with my clients in the EU when the new EU legislation was introduced. I gave them my UTR number instead and it seems to do the job (Spain, France, Austria, Germany).

HTH
Sabine

[Edited at 2010-08-27 10:17 GMT]


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Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
TOPIC STARTER
@Sabine Aug 27, 2010

That's what I did so far and it worked fine until now.

Apparently my Spanish client is now required to validate the numbers in this EU database (http://ec.europa.eu/taxation_customs/vies/vieshome.do). This obviously causes a problem because it only accepts genuine VAT numbers.

I suppose I'll just have to wait and see...


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Susan Andrew
Local time: 21:36
Spanish to English
No need to register Aug 27, 2010

Hi Daniela,

I had the same problem a few months ago with an agency in Spain. They insisted I had to register although when I rang HMRC here they told me I didn't have to. In the end I got round it by adding a note on my invoices stating that under British law I don't need to apply VAT, so far this seems to have worked.

Maybe you could try this?

Susan.


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Tom in London
United Kingdom
Local time: 21:36
Member (2008)
Italian to English
Yes Aug 27, 2010

Susan Andrew wrote:

Hi Daniela,

I had the same problem a few months ago with an agency in Spain. They insisted I had to register although when I rang HMRC here they told me I didn't have to. In the end I got round it by adding a note on my invoices stating that under British law I don't need to apply VAT, so far this seems to have worked.

Maybe you could try this?

Susan.


Yes, I always add that at the bottom of all my invoices.


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Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
TOPIC STARTER
@Susan Aug 27, 2010

I suggested that, too, but it doesn't seem acceptable to the client. I think their real issue is this - I quote from their email:

The problem is that we will have to pay VAT on all your invoices so it
becomes very expensive to work with you.


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Tom in London
United Kingdom
Local time: 21:36
Member (2008)
Italian to English
Crazy Aug 27, 2010

Daniela Gieseler-Higgs wrote:

I suggested that, too, but it doesn't seem acceptable to the client. I think their real issue is this - I quote from their email:

The problem is that we will have to pay VAT on all your invoices so it
becomes very expensive to work with you.


That's just crazy. If you don't apply VAT to your invoices because you are exempt, then (obviously) they don't have to pay it and no law could force them to. Perhaps they need to do more research.

[Edited at 2010-08-27 10:47 GMT]


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Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
TOPIC STARTER
Dead end... Aug 27, 2010

Not sure, Tom, their legal requirements might be different and it all might have changed by these new "place of supply rules", but I do know that I'm got going to waste more time studying the law and trying to fight their accountants ... I think this just one more example for bureaucracy gone mad, so I guess we're at a dead end here.

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Sonia Hill
United Kingdom
Local time: 21:36
Italian to English
Agree with Tom, Susan and Sabine Aug 27, 2010

Several of my EU clients asked me about this too, but my accountant confirmed what Tom has said. Once I informed my clients of this they investigated further and agreed that they did not need my VAT number.

Your Spanish client has misinterpreted the EU regulations, as there is no need for them to pay VAT on your invoices. It's difficult to know what to do if you can't convince them of this though.

As regards the hassle involved in having a VAT number, my husband has one for his small business and seems to think it is a lot of extra hassle and expense (he moans about it for days whenever he has to do any VAT form filling).

I would avoid getting a VAT number if at all possible.

[Edited at 2010-08-27 11:59 GMT]


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Neil Coffey  Identity Verified
United Kingdom
Local time: 21:36
French to English
+ ...
Maybe they mean it's easier... Aug 27, 2010

Daniela Gieseler-Higgs wrote:
The problem is that we will have to pay VAT on all your invoices so it
becomes very expensive to work with you.


Having spent a little while at one point reading some very boring information on various web sites, as far as I understand the situation is as Tom says-- if there's no VAT owing on the invoice because you're below the UK threshold, then there's no VAT owing by you, them, the mechanical unicorns in the sky or anyone, full stop.

What may be true is that it's more *hassle* for them to process invoices with no VAT number, because the onus is on them to prove to their local tax authorities that no VAT is owing, so in practice it's administratively easier to just pay the VAT.

What I don't understand-- with all the effort that has been gone to to create a VAT database working across member states, is why a database of tax IDs (just for non-VAT registered freelancers) couldn't also have been put in place. Perhaps we should start lobbying our MPs -- they may even get a few more trips to Brussels out of it.

[Edited at 2010-08-27 11:48 GMT]


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Tom in London
United Kingdom
Local time: 21:36
Member (2008)
Italian to English
Hassle Aug 27, 2010

Neil Coffey wrote:

it's more *hassle* for them to process invoices with no VAT number


That's the whole point. In order to save themselves about 5 minutes of extra work, maybe once a month, those accountants are perfectly happy to force the other party (us) to go through the immense hassle of registering for VAT and spending our entire lives keeping up with it.

I don't blame the agencies, I blame their accountants. Maybe this is an opportunity for us to get a whole lot of lazy accountants fired.



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Frances Leggett  Identity Verified
United Kingdom
Local time: 21:36
Italian to English
+ ...
I've registered despite being below threshold... Aug 27, 2010

Actually, as far as I understand it, for anyone self-employed in the UK but cross-trading with other EU member states, you need to register for VAT and put your VAT number on all your invoices. Given that if you are under the threshold, you don't need to pay VAT in the UK, you simply zero-rate your invoices (just insert a section with VAT 0%). You then fill in your quarterly VAT returns by simply zero-rating the total VAT and you do not need to pay VAT.

See this link: http://www.hmrc.gov.uk/budget2009/bn74.pdf

When I spoke to HMRC, they told me that if you are providing a service to another EU member country, you need to be registered and pay the VAT due in the country your business is based... I am based in the UK and do not have to pay VAT as I earn under the VAT threshold.

If, however, you have discovered otherwise, i.e. that you actually don't need a VAT number then don't worry about it! But at the end of the day, it's no hassle to fill in and zero-rate a VAT return every three months.

I also have clients who require my VAT number for INTRASTAT stuff... haven't figured out what that is yet...

It's all so confusing!!!

I just want to reaffirm that even if you have a VAT number, you do not need to pay VAT in the UK unless you earn above the VAT threshold, so all you need to do is zero-rate it (VAT 0%) and that's that.

[Edited at 2010-08-27 12:24 GMT]


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Daniela Gieseler-Higgs  Identity Verified
English to German
+ ...
TOPIC STARTER
@Frances Aug 27, 2010

Frances Leggett wrote:

Actually, as far as I understand it, for anyone self-employed in the UK but cross-trading with other EU member states, you need to register for VAT and put your VAT number on all your invoices. Given that if you are under the threshold, you don't need to pay VAT in the UK, you simply zero-rate your invoices (just insert a section with VAT 0%). You then fill in your quarterly VAT returns by simply zero-rating the total VAT and you do not need to pay VAT.


I've got two questions regarding this: Why can you just zero-rate your VAT? And why do you not need to pay any VAT?

As far as I understand it you don't have to charge your EU clients VAT, but you would have to charge UK clients and pay VAT on services provided to them, wouldn't you? I'm sorry if I'm missing the obvious here, but I've read so much about VAT that I'm now more confused than I was before


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