VAT - why pay it?

Boneman

Boneman

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Was just reading something my accountant sent me, and there was a bit on VAT. Now, why do writers have to pay VAT? Books are not VATable, and writers are only paid for every book sold, so surely, they shouldn't pay it. And what happens with sales in countries that don't have VAT at all? Is this why so many writers go abroad? Or have I got it wrong, somehow?

(okay, this is me daydreaming, but I need to know whether I should start looking where to go...:D)
 
Don't focus entirely on the paying of VAT; there's the possibility of claiming it back, in certain circumstances, on things you have purchased that are subject to VAT.
 
BM said:
Was just reading something my accountant sent me, and there was a bit on VAT. Now, why do writers have to pay VAT? Books are not VATable
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Yes, but he's not selling books - he's selling you a service, and that doesn't take into account what your business is about.

Nice try though...:p
 
Erm... everyone pays VAT if the service or goods bought are VATable**, it's just that those businesses which are VAT registered have to charge VAT on their goods/services but can claim the VAT back on the VATable things which they buy in. VAT registration is required if the taxable person (ie the business) provides goods/services which are VATable and the turnover is above the specified limit (currently £68,000).

** not all things are VATable - eg food and children's clothing, I think.

I don't know if I'm reading your post right, Boneman - are you worried about having to register for VAT when you become a millionaire best-seller? I'm kind of going round in circles in my head, here, but is a fiction writer a VAT registerable business? Is he/she providing goods/services to anyone? We need either a HM Revenue and Customs official or a writer who earns more than the limit - anyone out there??
 
ACA here, step back please ...

A writer needn't register for VAT unless he directly invoices someone for his services (and is over the threshold), which isn't the case with royalties. If he does invoice directly, then I suspect it would depend on the nature of the service -- freelance technical writing for a commercial organisation would be VATable, but selling them books he had written and bound himself wouldn't be. (Though there is a difference IIRC between zero-rated and VAT-exempt which I can't be bothered to look up unless someone pays me £200 per hour to do so.)
 
HareBrain said:
ACA here, step back please ...

A writer needn't register for VAT unless he directly invoices someone for his services (and is over the threshold), which isn't the case with royalties. If he does invoice directly, then I suspect it would depend on the nature of the service -- freelance technical writing for a commercial organisation would be VATable, but selling them books he had written and bound himself wouldn't be. (Though there is a difference IIRC between zero-rated and VAT-exempt which I can't be bothered to look up unless someone pays me £200 per hour to do so.)
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Took me five seconds, and I'm asking 200 quid per hour.


Zero rated supplies

This is a taxable supply, but the rate of tax is nil.

Group 1 - Food
Group 2 - Sewerage services and water
Group 3 - Books etc
Group 4 - Talking books for the blind and handicapped and wireless sets for the blind
Group 5 - Construction of buildings, etc
Group 6 - Protected buildings
Group 7 - International services
Group 8 - Transport
Group 9 - Caravans and houseboats
Group 10 - Gold
Group 11 - Bank notes
Group 12 - Drugs, medicines, aids for the handicapped, etc
Group 13 - Imports, exports, etc
Group 15 - Charities, etc
Group 16 - Clothing and footwear


Exempt supplies

No tax is chargeable on an exempt supply, and input tax cannot be covered except as allowed under the partial exemption provisions.

Group 1 - Land
Group 2 - Insurance
Group 3 - Postal services
Group 4 - Betting, gaming and lotteries
Group 5 - Finance
Group 6 - Education
Group 7 - Health and welfare
Group 8 - Burial and cremation
Group 9 - Subscriptions to trade unions, professional and other interest bodies
Group 10 - Sport, sports competitions and physical education
Group 11 - Works of art, etc
Group 12 - Fund-raising events by charities and other qualifying bodies
Group 13 - Cultural services, etc
Group 14 - Supplies of goods where input tax cannot be recovered
Group 15 - Investment gold
 
Five seconds? I make that just under 5p VAT, ctg.



(But it wasn't five seconds was it, ctg? You'll have the VAT inspector after you.)
 
CTG:

Interesting about the invoicing however, I suspect that the invoice isn't the qualifying item.

If it were, then no business would actually invoice their customers they would just agree to receive whatever they could settle on.

I imagine that there is some exemption for writers of fictional work and I understand there maybe some weird goings on when it comes to paying tax and allowances of income for losses in previous years etc.

How does it work. Perhaps John J. could throw some light.

If I send a manuscript of to an agent does he invoice me for finding a publisher or do they do a deal between themselves and I get the remnants? Do I have to chase a publisher for my royalties and if so, is that via an invoice or some other method?
 
Nothing to do with VAT as such, but if you are a "creator of literary or artistic work", or are a farmer, there is a mechanism to smooth out income across (two?) years and therefore the tax paid on that income.
 
But it's collected from the "producer"** (and can, in certain circumstances, be reclaimed by the "consumer").









** - and forwarded to the "taxman"
 
* Wonders: Who is it that's been spending public money telling us that "Tax doesn't have to be taxing"? *
 
Charging VAT really shouldn't be an issue unless you find yourself earning close to the VAT limit.

If that's the case in the first place, you'd probably already have been advised to set up as a limited company anyway as the tax advantages are probably greater that being a sole trader.

Paying VAT, on the other hand, is something everyone usually does for common items, but the VAT cannot be reclaimed unless you're VAT registered and the VAT charged is tax deductible as a business cost.

2c.
 
Boneman said:
So, books are zero rated, a writer is given a share of each book sold, but if his share goes over the VAT limit, he has to start paying it on his earnings. Is that correct?
Step forward ACA...
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Death and taxes Boneman

We come into this world naked and we leave it owing tax.
 
Boneman said:
So, books are zero rated, a writer is given a share of each book sold, but if his share goes over the VAT limit, he has to start paying it on his earnings. Is that correct?
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Er... no. You don't pay VAT on earnings. You pay income tax and National Insurance on earnings (or corporation tax if you do turn yourself into a limited company - but I think HMR&C will be looking closely at that kind of thing in future**). VAT is charged by the supplier/producer when he sells, and therefore paid by the consumer when he buys.

I'm happy to be corrected, but I really don't think VAT enters into the equation for a fiction writer, no more than for any other person buying ordinary stuff. That is, you will pay VAT on your pencils and lawyer's fees, but you won't be charging it to anyone. In any event, stop worrying about it now. When you land your big deal, you can pick your agent's brains. And if you get a big enough deal you ought to be speaking to your accountant anyway about other tax-evasion dodges... er... I mean... legitimate ways of avoiding tax in all its multi-various forms.

TEIN, you're right, it isn't the invoicing as such which creates the VATable bit, but the supply of the good/services - but a VAT registered business must provide a VAT invoice. So far as payment is concerned, as I understand it, your agent chases the publisher and receives the whole amount due, whether by way of the advance or any royalties; the agent then deducts his/her 15% or whatever and accounts to you for the balance together (I assume) with an invoice - since the agent's fees are a deductible expense when it comes to filling out your tax form (because you have to disclose the gross earnings, not the nett you actually receive into your hot, sticky hands). And if the agent earns enough, then presumably his/her invoice will carry VAT, since he/she is providing a service.


** and it's of note that Terry Pratchett hasn't turned himself into a limited company (though he and his wife have a formal parnership with regard to copyright at least).
 
Seems I was wrong -- authors who earn over the threshold do charge VAT on royalties received from UK publishers, and pay it on agents' commission (on royalties from UK publishers), though the accounting sounds pretty complex.

Read this

Then get back to your work.
 
And if you get a big enough deal you ought to be speaking to your accountant anyway about other tax-evasion dodges... er... I mean... legitimate ways of avoiding tax in all its multi-various forms.
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:eek:...I hope you're advocating the latter, not the former, yeronner....
 
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