When dealing with your income and accounts, you may have occasionally heard mention of charging VAT. It isn't something that will apply to all Creators, but it's always worth being in the know about what to charge and when, should the time ever come.
Sam Uwins, Accountant for Social Influencers and Online Content Creators at MHA Carpenter Box, is here with the lowdown...
What is VAT?
VAT is a sales tax, which is required to be charged by businesses to their customers. VAT stands for Value Added Tax. The current rate in the UK is 20%.
When should a Creator register for VAT?
A Creator is required to register for VAT once their taxable turnover is in excess of £85,000 in a rolling 12 month period. Now, VAT is one of the most complex taxes administered by HMRC. The taxable turnover definition is not clearly defined. In our experience, taxable turnover will exclude income from outside the UK that content creators have charged. Although the overall threshold is £85,000 and your income maybe in excess of that, that doesn't mean you necessarily have a requirement to register, depending on the source of your income.
When should a Creator include VAT on their invoices?
A Creator can only include VAT on their invoices once they are VAT registered. You may be required to register if your income is in excess of £85,000. However, you can also voluntarily register if you do have no compulsory requirement to register. A business even just starting out may consider registering for VAT in order so that they can recover the VAT on their expenses. If they were to do this, they will be required to charge VAT on their income where applicable.
How can being VAT registered help a Creator?
By being VAT registered, a Creator will be able to recover the VAT on all of their costs and business expenses. This will include camera and computer equipment that you may have purchased, which will often include VAT at 20%. You can also look back four years, from the point of being registered, and reclaim any VAT on any equipment that you still use within the business.
How can a Creator register for VAT?
Before registering for VAT, it is recommended that a Creator discuss this with their accountant. It's very important that the correct date of registration is submitted before you register, as if you get this date wrong, it can be a very costly exercise to put right. It's a simple form to complete online and shouldn't take too long to do. Again, it's essential that the correct registration date is used to avoid any unnecessary problems going forward.