MicrostockGroup
Microstock Photography Forum - General => General Stock Discussion => Topic started by: Microbius on February 12, 2012, 06:04
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A question for any microstockers based in the UK.
Does anyone know how VAT and stock earnings works?
Is our stock income subject to VAT? i.e. if I became VAT registered would I suddenly have to take a 20% hit to my income as I can't add VAT to the prices charged by the agencies? (I have very few expenses to reclaim on) is it only earnings from UK agencies (eg Alamy) that are VAT taxable?
Help please!!
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VAT is not payable on overseas income in the UK. If you have very few expenses to reclaim VAT on it would hardly be worth registering anyway, unless you're earning more than the VAT threshold on your UK income (Currently around £73,000) I was VAT registered but de-registered as more of my income came from overseas ( stock earnings) and very little from UK. The consequence of this was that I got to the point that every quarter the VAT man was paying me more than I was paying them and I'd heard that is the point that they may want to start investigating, so, as I was below the UK earnings threshold I de-registered.
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Thanks so much for replying. It's coming to the point where I think I could be forced by the threshold to register in the next year or two (hopefully).
So I shouldn't have to worry about VAT with most of the agencies other than Alamy I guess, what about the ones in the EU? I though that VAT was also chargeable withing the EU if you are based in the UK?
Is there any king of exemption for digital goods or commission payments?
I think I'm going to have to get an accountant, but unless I can find on that specializes in this sort of thing I don't know if they'll know enough about the stock business model to give a solid answer.
The alternative is to go flat rate and get stung on all income, but then at least the accounting will be simple!
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Yes, the VAT rules are different for EU countries, I was thinking of my own istock income not being VAT chargeable. Unless you are buying a lot of equipment, it's more hassle that it's worth, I hated having to do my VAT every 3 months. Any UK accountant will do it for you, they don't have to know about the stock business, just how much money comes from where. If you're approaching VAT threshold income do you not have an accountant anyway?
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The reason I was thinking they need to know the business is in case there are any rules for selling licenses or commission payments that could be applied that would make earnings VAT exempt or at least reduce it; it seems that stock income doesn't fall neatly into "goods and services"
I don't have an accountant as the accounts have always been really easy to do, all my payments, commission and stock, come through Paypal with very few exceptions, and as I say costs are pretty minimal, new computer every few years, software upgrades and the usual utility overheads.
I really appreciate your input a there seems to be little or no info about this on the web!
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Well firstly I'm no accountant, but I'd have thought stock imagery would fall pretty much into the 'goods and services' category. I'd never considered the position with EU stock agencies, having personally only ever dealt with istock and getty, but I suspect if you were VAT registered you'd have to pay the VAT on EU sales, whether you can charge it or not ( and you obviously couldn't charge it), so you might well take a 20% hit on EU stock earnings. An accountants advise would be worth seeking I think.
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As far as I'm aware you're not doing the selling (the agencies are) so, unless you do additional commercial jobs, you wouldn't have to charge VAT. It may actually work in your favour as, when you are VAT registered, you can claim the VAT back on most of your own expenditure. I've a buddy who is a 'print broker' and most of what he sells is VAT zero-rated (books, posters, etc) so quite often the VAT man has to send him a cheque. You do need to find yourself a cheap accountant though. Mine charges me about £250 per year for advice and doing my tax return.
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I think, once you are VAT registered, you can retrospectively claim back VAT on capital expenses, possibly over the last 2 or 3 years, so that ( if true, and I'm relying on memory and I'm not an accountant)is an added bonus. In fact, I may start looking at re-registering, as I'm planning some big IT spending soon.
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As far as I'm aware you're not doing the selling (the agencies are) so, unless you do additional commercial jobs, you wouldn't have to charge VAT. It may actually work in your favour as, when you are VAT registered, you can claim the VAT back on most of your own expenditure. I've a buddy who is a 'print broker' and most of what he sells is VAT zero-rated (books, posters, etc) so quite often the VAT man has to send him a cheque. You do need to find yourself a cheap accountant though. Mine charges me about £250 per year for advice and doing my tax return.
I am hoping very hard that either commission payment or license sales fall into one of the zero rated or exempt categories. If that is the case then I would probably be getting money back even with my meager expenses!
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I am hoping very hard that either commission payment or license sales fall into one of the zero rated or exempt categories. If that is the case then I would probably be getting money back even with my meager expenses!
Alamy would probably be the only agency that you'd have to worry about VAT on (there's a procedure within your account settings to set it up whereby they 'self bill' you) , all the microstock sites are overseas, if you submit to any other UK based agencies then you'd have to set up something similar to Alamy. IMO what someone said earlier about the hassle involved are wise words, it may seem like an interesting prospect to get money back from the VAT man every quarter but do you really buy enough equipment to justify the hassle involved, and want to pay an account the extra for doing it for you or risk getting it wrong and getting audited?
My advice would be to speak to your/a decent accountant and find out a. if you have to be VAT registered (despite what you said earlier I very much doubt you are or indeed near to needing to be, if stock accounts for 90% + of your earnings) & b. get them to explain the benefits and pitfalls involved.
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I'd definitely agree with the above. VAT is not some cash cow to be milked indefinitely to boost your income, don't forget in the UK that VAT/Customs and Excise have more legal powers in terms of searching and enquiring into your affairs than do the police. When you're VAT registered you take on the role of a tax collector and it's a hassle, I know, I've been there. When you're VAT registered, if you pay little or no VAT but are getting a cheque from the VAT man every 3 months, eventually they are going to audit you to see why, as VAT fraud is a serious problem, and collecting no VAT but being paid by the VAT man is seen as a sign of potential fraud. Even submitting your own tax returns, considering you claim to have an income approaching VAT registration levels which are £73,000,is making you much more liable to an Inland Revenue audit.
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I would 100% like to stay not registered, just in terms of time taken to do the accounts. Circumstances mean that I need to do these calculations now though, so thanks again for the help. The other question is whether I need to consider my total income when calculating the threshold or just VAT payable amounts (EU and UK agencies) but you are both right, I will need to see an accountant.
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The other question is whether I need to consider my total income when calculating the threshold or just VAT payable amounts (EU and UK agencies) but you are both right, I will need to see an accountant.
It is apparently just the VAT taxable elements that count so you should be ok. There is a ton of info on HMRC's website here;
http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm (http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm)
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@Microbius
Just sent you a PM but forgot to add - have you considered moving to the IoM or Jersey :D
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The other question is whether I need to consider my total income when calculating the threshold or just VAT payable amounts (EU and UK agencies) but you are both right, I will need to see an accountant.
It is apparently just the VAT taxable elements that count so you should be ok. There is a ton of info on HMRC's website here;
[url]http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm[/url] ([url]http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm[/url])
Fantastic!! Replied to RT before I saw that link. That means I will probably never have to register!
Thanks