VAT registration for editors and translators – is it worth it?

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When I first set up my business, I noticed a big difference between my editor and translator friends. Almost all editors had made a website detailing the services they offer. While a few translators had a website, many more did not bother. Why was there such a big difference?

The answer: most translation work is business to business (B2B). Some translators work with agencies, others with direct clients. But even those direct clients are usually businesses or publishers of some sort.

In contrast, many editors have a bigger mix of B2B and business to customer (B2C) work. This is especially true of editors working with indie authors, but also quite often the case with academic researchers paying for services out of pocket.

Knowing this detail about your client base is important when deciding whether to register for VAT.

Why register for VAT?

In the UK, the threshold of VAT-taxable turnover for VAT registration is high (around £85,000) compared with other European countries. Understanding and dealing with VAT is the norm for many translators based in EU countries, while it is not so common in the UK. So, what are the positives and the negatives?

For many companies across Europe, having a VAT number is a sign of professionalism as my business adviser in Germany highlighted when we discussed VAT. This alone is not reason enough to register though!

The positives

  • You can claim VAT back on purchases
  • You have a number on your invoice so people can check you are a legitimate enterprise
  • Some clients may perceive you as more professional

The negatives

  • You have to add VAT (often 20%) to all invoices, which means you have to increase your prices for B2C work
  • A bit more paperwork each year
  • VAT can get very complicated for certain services (e.g. if you want to sell an online course)

Why did I register?

The main reason I registered is because several key European clients told me they needed a VAT number.

How did it affect my business?

The main effect was in pivoting towards B2B clients. The percentage split went from around 45%:55% (B2B:B2C) in my first year to around 80%:20% in my second tax year.

One clear loser in registering for VAT is in sourcing work through peer-to-peer platforms. These are sites (e.g. Upwork, Peerwith), where you pitch services directly to end-customers, who find you and hire your services through the platform. The platform then takes a cut (e.g. 20%). Where you are contracting directly with the end-customer, you lose out on both the VAT and the platform fees, which may be 10–20%.

When working with academic researchers, VAT registration means it is much better for me if I am paid officially via a university (usually with project funds), rather than privately, out of their own pocket – this is usually also better for the researcher. This has encouraged me to seek out more “professional” projects (e.g. book copyediting and developmental editing) and turn me away from, for example, editing masters and PhD dissertations. This is also good for my business as I can advertise the published books I have worked on.

As I am starting to work with indie authors now, I may deregister for VAT, especially as an EU VAT number is no longer required. I suspect that some clients in countries like Germany and Spain will still expect a tax number on my invoices though.

Finally, a Brexit update

I wrote an earlier version of this post before the end of the Brexit transition period. Things have changed again now. In January 2021, I hired an accountant and learnt the following:

[Please don’t use this information as tax advice for your own situation – every service has a different VAT treatment].

  • From 1 January 2021, VAT is no longer added for B2C transactions for editing and translation jobs with EU member states*
  • From 1 January 2021 UK VAT-registered businesses no longer have to complete the EC sales list
  • The VAT reverse charge on B2B supply of editing and translation services still applies, as it does to other third countries

In practice, these changes mean doing business with EU customers is now easier and cheaper for me. Somewhat absurdly, it is now cheaper for me to work with EU customers than UK-based ones.

*More precisely, these transactions are “out of scope of UK VAT”

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