Non-VAT registered UK agency - VAT registered Finnish translator
Thread poster: Niina Lahokoski

Niina Lahokoski  Identity Verified
Local time: 21:28
Member (2008)
English to Finnish
+ ...
Aug 10, 2011

I did a project for a new client. I asked if they have a VAT number, which they don't, so I reminded that I will have to charge them VAT. As far as I understand, I am required to collect VAT from every non-VAT registered client within EU, and every client in Finland whether registered or not, and that the "reverse charge procedure" applies to VAT registered companies only. Now the client replied that they don't have to pay me the VAT:

"We are not required to pay the VAT on your invoice as per the UK/EU law about the "intellectual services". Also, we are not required to obey to a Finnish law, but to a UK/EU instead.
The correct EU law which you should refer to is the Directive 2008/117/EC. You should include something like the following to your invoice to avoid any issues:
Without Finnsih VAT (reverse-charge-system) 0,00 EUR
Tax paid abroad according to Directive 2008/117/EC."

Could someone clarify how this works? I read the directive and tried to understand it, but I can't see how it has anything to do with our case.

If nothing else, the frequent VAT related questions on this forum prove that the EU VAT system is overly complicated and confusing at least in the case of small businesses dealing internationally...


Sandra B.
Local time: 19:28
Member (2005)
English to Portuguese
+ ...
... Aug 10, 2011

I had exactly the same problem with a client in the UK. But my client paid the VAT with no problem (which I then returned to the Portuguese state). According to my tax office we are indeed obliged as per the new legislation in place since Jan. 2011 to charge VAT to non registered VAT companies within the EU. They were very clear about this.

[Edited at 2011-08-10 13:17 GMT]


Roberto Bertuol  Identity Verified
United Kingdom
Local time: 19:28
Member (2007)
Italian to English
+ ...
UK non-VAT registered self-employed Aug 10, 2011

I reside in UK and I am self-employed but I am not VAT registered myself.
If you are based in UK and are non-VAT registered, then you are considered (for tax purposes) as a private individual (Non-VAT registered self-employed) not as a business or company. Therefore, if you issue and invoice to a UK "business" without VAT, you should consider it as a private individual and therefore add the VAT. In UK you can do business without being VAT registered if your income does not exceed a certain threshold (which is quite high). The advantage is less paperwork..the downside is that you cannot claim back VAT should you buy equipment or services from other businesses.
In a nutshell, if your client is non-VAT registered, then you should add the VAT to your invoice, simple as that.
Hope this helpsicon_wink.gif
Roberto Bertuol


AnneMarieG  Identity Verified
Local time: 20:28
Member (2009)
German to French
+ ...
VAT - non VAT Aug 10, 2011

When you purchases (translation) services within the EU you do not pay VAT (to your supplier), however you have to declare your purchase to your own tax dept and actually pay the VAT to the tax dept - regardless of your size and income.
It seems that certain countries, like the UK, need some (extra) time to adjust to this European legislation.
Hence, you need a VAT nbr on your own, and you need the VAT nbr of your client and/or supplier.

Hope this brings even more confusion onto the situation -)



Williamson  Identity Verified
United Kingdom
Local time: 19:28
Flemish to English
+ ...
Not that difficult. Aug 10, 2011

This directive only deals with VAT-listings, not with the reverse charge procedure.
The reverse charge procedures is described in a directive from 2006.
You are correct and they are mistaken.
Should they have a VAT-number, the reverse charge mechanism applies.

Should you be an agency and they the translator, they are not allowed to add VAT to their invoices.

An agency without a VAT-number is an agency with a turnover of less than £72,000.
Can you call such an outlet an agency? It is undercapitalised and not capable of prefinancing one large assignment.

HMRC no so clear explanation of reverse charge/VAT changes 2011

[Edited at 2011-08-10 15:40 GMT]


RobinB  Identity Verified
United States
Local time: 13:28
German to English
Misquoting the rules Aug 10, 2011

The fact that this company is exempt from charging VAT under the UK small business regime doesn't mean that they're exempt from *paying* VAT. In that respect, your invoice to them is no different to an invoice they receive from a UK company (e.g. utility), which will also contain VAT that they will have to pay. Unlike VAT-registered companies, however, they can't claim the input VAT against any output VAT, i.e. they have to declare the full (gross) amount as a normal business expense in their tax return.

And, as they're not VAT-registered, they can't claim any reverse charge VAT relief.

My suggestion is to outline this legal situation to them, politely, and ask them to pay the Finnish VAT you have to charge on your service and remit to the Finnish VAT authorities. If they then refuse to pay it, probably your best bet is to speak to a lawyer, because a) it's likely that you're going to have to pay that VAT yourself in the first instance, and b) you'll have to take the UK company to court to reclaim it (depending on the amount involved, this could be through the EU small claims procedure). You will probably also have to consider notifying the tax authorities of the UK company's failure to pay the VAT amount, and they will then forward the information to HMRC in the UK. Your lawyer may also advise you to file a complaint with the public prosecutor's office in Finland.

At any rate, you surely won't want to work for this agency again. Look on the bright side: an agency that isn't VAT-registered in the UK has an annual revenue of less than around EUR 75,000 or so, so it's probably massively undercapitalised and a serious credit risk- they can't possibly have the cash flow to operate a genuine, sustainable translation agency business.



Niina Lahokoski  Identity Verified
Local time: 21:28
Member (2008)
English to Finnish
+ ...
Thanks Aug 10, 2011

Thank you everyone! I was quite sure I'm right, but needed some peer support. Now to try and explain things nicely to the client...


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Non-VAT registered UK agency - VAT registered Finnish translator

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