Uk translators only: is voluntary VAT registration worth it?
Thread poster: xxxUSER00230
xxxUSER00230
United Kingdom
Local time: 13:31
German to English
Aug 20, 2005

This is for UK translators only due to our exceptionally high VAT threshold of £60,000 (and then, only to those whose revenues are less than 60K, which I assume is the majority of us).

I am considering registering voluntarily and would be interested in hearing what everyone else thinks.

In particular, how heavy is the paperwork/hassle and is it worth it (insofar as you can estimate this kind of thing).

Also, has anyone experienced any negative reaction from UK clients who now have to pay rate +17.5% VAT up front?

many thanks in advance


Direct link Reply with quote
 
Pat Jenner
Local time: 13:31
German to English
+ ...
Yes and no Aug 20, 2005

This is something that's been on my mind for a while. I am currently VAT-registered, but am seriously considering deregistering since my accountant pointed out that I pay him more to deal with the paperwork than I save by being able to claim back VAT. You should also bear in mind that the turnover threshold applies only to UK sales, so if you (like me) have quite a lot of clients abroad you will not be in any danger of crossing the threshold.

The paperwork isn't that onerous in itself, you just need to get into a routine of producing a spreadsheet of income and expenditure once a quarter and either working out the VAT yourself or sending it to a professional. From the cashflow point of view you have the option of paying VAT either as you charge it to customers or as you receive it (called the cash accounting method).

Most clients for translation services will be VAT-registered themselves, so the VAT element on your invoice makes no difference to them.

On balance I would say that it probably isn't worth it unless you plan to make a major investment (IT equipment, for instance) and/or deal with the paperwork yourself. You should also bear in mind that Customs and Excise frown on entrepreneurs who register in one quarter, incur high expenses on which they reclaim VAT and then deregister. Another point is that if you fall under suspicion of fraud, Customs and Excise have extremely far-reaching investigatory powers.

Hope that helps


Direct link Reply with quote
 

Adam Smith
United Kingdom
Local time: 13:31
Dutch to English
+ ...
Not too much paperwork....but difficult to convince clients Aug 20, 2005

Hi Bill,

When I started out I signed-up for voluntary VAT registration even though my earnings were considerably less than 60k per year! I had to do this mainly because a number of (Dutch) clients wanted and eventually insisted on VAT registration.

The paperwork is really very minimal - a simple form arrives every 3-4 months and needs to be returned within a month, and obviously the VAT you pay on items for your business can be reclaimed. However, the main problem for me was that although some clients were insisting on VAT registration they were unable to accept the additional 17.5% increase in rates. In essence I was accepting jobs at a given rate - not including the VAT rate - and having to pay the 17.5% out of this.

So finally I decided that I couldn't continue translating effectively at a loss and the "hassle" from the VAT - minimal though it was - was not enough to warrant registration, so I cancelled my registration.

This has obviously limited to some extent the number of agencies for which I work, but there's enough work to keep me afloat!

I can't speak for UK agencies, because none of them have ever asked for a VAT number, but the question you have to ask your clients is whether they are willing to accept the additional 17.5% fees. If they are, then VAT registration is not too cumbersome or problematical, but if the clients are unwilling to pay then it certainly is not worth it!

Hope this helps!

Adam


Direct link Reply with quote
 
RobinB  Identity Verified
Germany
Local time: 14:31
German to English
Unwilling to pay VAT????? Aug 21, 2005

Adam Smith, PhD wrote: However, the main problem for me was that although some clients were insisting on VAT registration they were unable to accept the additional 17.5% increase in rates. In essence I was accepting jobs at a given rate - not including the VAT rate - and having to pay the 17.5% out of this.


Just a quick interjection here to say that I've *never* heard of a customer who was unwilling to pay VAT. Were these in the UK or abroad? The point is, of course, that VAT doesn't add a penny to the cost of a translation - input VAT is deductible from output VAT, and is thus entirely cost-neutral (that being the point of VAT in the first place - it's only the final consumer who pays). So I don't really understand e.g. an agency that doesn't want to pay input VAT, but presumably has to charge output VAT on its own invoices.

Or am I missing something here?


Direct link Reply with quote
 

Adam Smith
United Kingdom
Local time: 13:31
Dutch to English
+ ...
Reply to: Unwilling to pay VAT????? Aug 21, 2005

[quote]RobinB wrote:

Adam Smith, PhD wrote: However, the main problem for me was that although some clients were insisting on VAT registration they were unable to accept the additional 17.5% increase in rates. In essence I was accepting jobs at a given rate - not including the VAT rate - and having to pay the 17.5% out of this.


Just a quick interjection here to say that I've *never* heard of a customer who was unwilling to pay VAT. Were these in the UK or abroad? The point is, of course, that VAT doesn't add a penny to the cost of a translation - input VAT is deductible from output VAT, and is thus entirely cost-neutral (that being the point of VAT in the first place - it's only the final consumer who pays). So I don't really understand e.g. an agency that doesn't want to pay input VAT, but presumably has to charge output VAT on its own invoices.

Or am I missing something here?


The point is that a job would be offered at a given rate, take for instance 0.08 Euro per word, from which I would have to deduct 17.5%, because the agencies (abroad) would not agree to 0.094 Euros, i.e. 0.08 + VAT. It's not that they were not willing to pay VAT, they just didn't want to include it in their rates! They offered a flat rate, and seemed unable to comprehend that my rates would have to be adjusted to include VAT, so effectively I ended-up out of pocket, i.e. it was not cost-neutral for me. Because VAT registration in the UK is voluntary below 60k I felt that in the long-run it was not economically viable for me to stay VAT registered.


Direct link Reply with quote
 
xxxMarc P  Identity Verified
Local time: 14:31
German to English
+ ...
Uk translators only: is voluntary VAT registration worth it? Aug 21, 2005

Some (end) customers may not themselves be registered for VAT for some reason. I don't know about the situation in the UK, but an accountant once pointed out to me that German charitable organizations may not be registered for VAT and not therefore have VAT revenues which VAT expenditure can be offset against.

A translator not registered for VAT obviously has a price advantage where such customers are concerned.

However, it is then contradictory for such a customer to expect you to register for VAT. If the customers who are expecting you to register for VAT are the same ones who refuse to pay it because they themselves can't offset it, then it sounds very much like a scam.

Marc


Direct link Reply with quote
 
Angelina Souren
Local time: 13:31
English to Dutch
+ ...
VAT, yes Aug 21, 2005

Hi,

I recently relocated from Holland to the UK, so I was used to VAT as basically, a piece of cake. Some cross-border situations can be complicated (as you probably know, things have been changing quite a bit, too), but it's not that bad.

As anyone who has a legitimate business in Holland is VAT-registered (not an option), one might come across as a moonlighter without VAT registration. Some parties' software even needs a VAT number.

As long as your invoice lists your VAT number and the EU client's, you do not have to charge VAT: it's deferred.

I was surprised, however, to get a (long) phone call from C&E after I registered. They wanted to know exactly on what sorts of purchases I was going to be claiming VAT. I am not a psychic, so I am sure I forgot a few things.

Hope these 2, eh, pennies? help.

Angie


Direct link Reply with quote
 


To report site rules violations or get help, contact a site moderator:


You can also contact site staff by submitting a support request »

Uk translators only: is voluntary VAT registration worth it?

Advanced search







memoQ translator pro
Kilgray's memoQ is the world's fastest developing integrated localization & translation environment rendering you more productive and efficient.

With our advanced file filters, unlimited language and advanced file support, memoQ translator pro has been designed for translators and reviewers who work on their own, with other translators or in team-based translation projects.

More info »
SDL Trados Studio 2017 Freelance
The leading translation software used by over 250,000 translators.

SDL Trados Studio 2017 helps translators increase translation productivity whilst ensuring quality. Combining translation memory, terminology management and machine translation in one simple and easy-to-use environment.

More info »



Forums
  • All of ProZ.com
  • Term search
  • Jobs
  • Forums
  • Multiple search