Voluntary VAT registration? Thread poster: Madeleine MacRae Klintebo
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I’m returning to full-time freelancing after a number of years working in-house for an end client (non-agency). As I have a few weeks of gardening leave, I’m trying to ensure I have everything set up as ideally as possible.
Right now, I’m trying to decide whether or not to voluntarily register for VAT.
Although I don’t expect to have an enormous turnover during the first year or two, I can imaging a few scenarios in which registering for VAT might be useful.... See more I’m returning to full-time freelancing after a number of years working in-house for an end client (non-agency). As I have a few weeks of gardening leave, I’m trying to ensure I have everything set up as ideally as possible.
Right now, I’m trying to decide whether or not to voluntarily register for VAT.
Although I don’t expect to have an enormous turnover during the first year or two, I can imaging a few scenarios in which registering for VAT might be useful.
I would appreciate input from those of you who have considered voluntary registration and have either chosen to register or decided it was too much work for little benefit. ▲ Collapse
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One avantage is the VAT (included in the goods and/or services you buy) you can set off against the VAT added to your invoiced amounts.
Gudrun
| | | | Russell Jones 
United Kingdom
Local time: 12:59
Italian to English
| and one disadvantage | Jan 5, 2013 |
is that you will be more expensive for individual clents and small businesses that are not registered for VAT, which is naturally relevant only if these are amongst your target clientele.
| | | | | I forgot to mention: | Jan 5, 2013 |
I don't charge VAT for agencies abroad, of course (business to business). I charge it for domestic clients (agencies and individuals) and individuals living abroad.
At least this is the rule here in Germany.
Gudrun
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Sue Stewart-Anderson (X)
United Kingdom
Local time: 12:59
Dutch to English
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| I did it in your position | Jan 5, 2013 |
I registered voluntarily when I was setting up as a freelance (over 20 years ago). The main benefit is obviously when you make large purchases such as computer equipment. Also it gives you an established, professional look, which can be useful depending on the type of client you want to attract.
The downside for me was initially the extra admin, though it is simple enough once you get the hang of it and nowadays is all done online. Don't forget you will also need to fill in an EC sa... See more I registered voluntarily when I was setting up as a freelance (over 20 years ago). The main benefit is obviously when you make large purchases such as computer equipment. Also it gives you an established, professional look, which can be useful depending on the type of client you want to attract.
The downside for me was initially the extra admin, though it is simple enough once you get the hang of it and nowadays is all done online. Don't forget you will also need to fill in an EC sales list if working for EU clients (easy to do quarterly online at the same time as the vat returns).
I did consider deregistering after my initial set-up costs but I still find it worthwhile to be vat-registered on an ongoing basis because the extra admin only amounts to a couple of hours a quarter if you keep on top of your accounts. ▲ Collapse
| | | | Adrian MM. (X)
Local time: 13:59
French to English
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| Voluntary registration to be prepared | Jan 5, 2013 |
Madeleine MacRae Klintebo wrote:
As I have a few weeks of garden leave, I’m trying to ensure I have everything set up as ideally as possible.
Right now, I’m trying to decide whether or not to voluntarily register for VAT.
1. if you are already registered, you need not worry if you go - inadvertently - over the UK VAT registration limit. You are already forearmed. If you employ an accountant - tax deductibly at that - the latter can deal with your returns, whether quarterly or annually http://www.hmrc.gov.uk/vat/start/schemes/annual.htm and can advise you on whether to join the flat-rate scheme: 12% vs. 20% and no recoverable input VAT.
2. 'an established, professional look' Sue S-A: it is a kind of cachet or status marker for an unincorporated business.
3. some clients will wonder why translators are not UK VAT regd - and there may be problems when dealing with private or agency clients in countries like France, Spain and Germany who, before paying up, keep on asking for the supplier's VAT no. for the VAT no-charge exemption.
[Edited at 2013-01-05 18:43 GMT]
[Edited at 2013-01-05 18:45 GMT]
| | | | inkweaver
Germany
Local time: 13:59
French to German
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| Don't see any advantage... | Jan 5, 2013 |
But that is of course a matter of personal preference.
Unfortunately I had to register for VAT a couple of years ago (the income threshold in Germany is ridiculously low) and I still loathe the extra work it implies. I don't see any advantages and would happily pay VAT on whatever I buy for my office (which is not much, really) if I had the choice to opt out.
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@Russell - I have considered private/small business clients, but ,with the exception of a few individuals who might need translation of certificates, I can't imaging there to be many UK-based ones that are below the threshold.
@Gudrun - I used to be VAT registered when freelancing based in Sweden, but the difference between most of the EU and the UK is the threshold at which you are legally required to register. That is why I posted in the UK forum.
@Sue - very useful i... See more @Russell - I have considered private/small business clients, but ,with the exception of a few individuals who might need translation of certificates, I can't imaging there to be many UK-based ones that are below the threshold.
@Gudrun - I used to be VAT registered when freelancing based in Sweden, but the difference between most of the EU and the UK is the threshold at which you are legally required to register. That is why I posted in the UK forum.
@Sue - very useful information, but I would love to hear more. Have you found that the benefit of offsetting VAT on purchases outweighs the extra admin?
Also, what rough percentage of you clients are non-UK, but EU, based? I understand that it can sometimes be complicated working for clients in certain EU countries as they/their accountants find it difficult to understand the UK situation (not a major concern as I envisage most of my clients to be based in either UK or Sweden).
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My background:
Freelancer in UK, not VAT registered, for some years.
Freelancer in Sweden, VAT registered as required, for some years.
Employee + doing some freelancing in the UK for the last 7+ years, not VAT registered. ▲ Collapse
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| VAT registered and based in the UK | Jan 5, 2013 |
I am VAT registered and spend 3 hours a quarter on filling the VAT return and EC list. 90% of my customers are EU based and I have now no issues with them because I am VAT registered. My 10% UK-based customers have not complained about having to pay VAT. Normally, I receive money back each quarter because my outgoings are higher than the VAT I collect. A bit strange but hey, who cares. I am not voluntarily registered for VAT.
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Tom Thumb wrote: 1. if you are already registered, you need not worry if you go - inadvertently - over the UK VAT registration limit. You are already forearmed. If you employ an accountant - tax deductibly at that - the latter can deal with your returns, whether quarterly or annually http://www.hmrc.gov.uk/vat/start/schemes/annual.htm and can advise you on whether to join the flat-rate scheme: 12% vs. 20% and no recoverable input VAT.
I don't expect to build a huge client base during the first year, but I do have a card up my sleeve that might bring in some serious money. So being forearmed/forewarned might be useful.
Although I intend to employ an accountant for the first year, I expect to be able to handle the quarterly returns myself. I hadn't heard of the flat-rate scheme, but will research it.
| | | | | Thanks Marijke | Jan 5, 2013 |
Marijke Singer wrote:
I am VAT registered and spend 3 hours a quarter on filling the VAT return and EC list. 90% of my customers are EU based and I have now no issues with them because I am VAT registered. My 10% UK-based customers have not complained about having to pay VAT. Normally, I receive money back each quarter because my outgoings are higher than the VAT I collect. A bit strange but hey, who cares. I am not voluntarily registered for VAT.
That is roughly the set-up I envision - 3 hrs/quarter doesn't seem to be an enormous amount of time considering the potential benefits.
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I think its a cashflow issue more than anything else. In other words you can use the VAT as positive cashflow but do remember to save too - once a quarter you will have to pay it to the revenue. Check out the rules for offsetting past VAT paid - you could get a refund on your first return.
Gillian
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| Limit applies to UK customers only | Jan 8, 2013 |
And the limit only applies to invoices with UK customers only. All work done with European customers is irrelevant to reaching the limit - which means most freelancers will never reach it unless they are doing LOTS of work for UK customers.
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