VAT - An Overview for Professional Photographers

Overview - What is VAT?

VAT (Or Value Added Tax) is charged on transactions if you are in business and certain conditions are met. In this article, we'll cover some of the key points on VAT for professional photographers.

In simple terms, you charge VAT to your customers, you would charge customers an additional 20%. You can then usually reclaim VAT incurred on your business expenses, and pay the balance to HMRC. If in any VAT period your expenses exceed your income (and so your VAT incurred is more than that charged on your customers), you can claim a refund from HMRC.

When Do I Need To Register?

There are two types of registration; Mandatory and Voluntary.

Mandatory Registration

You must register for VAT if one of the following events occur

• Your rolling 12 month turnover exceeds the Registration Threshold, which is currently £90,000, or

• You expect your turnover to exceed the Registration Threshold within the next 30 days

You should ensure you have processes in place, as you only have 30 days from one of these events occurring to register to remain compliant.

Voluntary Registration

You can chose to register for VAT where your turnover does not require mandatory registration. The decision on voluntary registration is tricky, and as a starting point, the type of customers who have will influence whether voluntary registration is the correct approach.

For example, if you are predominantly a food photographer, working with local pubs and restaurants, it is likely that your customers are themselves VAT registered businesses, and therefore any VAT they incur on expenses (e.g. your photography) will be offset against the the VAT they charge on their customers. Pubs and Restaurants therefore, may not be overly concerned whether you are, or are not charging them VAT.

It may be that if you are a product photographer with a customer that is a large brand, it is not unheard of for them to only want to deal with VAT registered suppliers (as it gives them confidence that you are a legitimate entity that is registered with HMRC).

On the other hand, if you are a wedding photographer, your customers are unlikely to be VAT registered businesses, and so they cannot reclaim VAT they incur from you, meaning your fee is 20% higher than it would otherwise be.

As you can see, voluntary registration is a difficult decision, that shouldn't be taken lightly.

What is the impact of Registration?

In simple terms, from registration, you will charge VAT on any invoice raised. The current amount for a "standard supply" is 20%. For example, if you were to raise an invoice for £1,000, your invoice will now also include £200 VAT, and a total invoice amount of £1,200.

What is the Flat Rate Scheme?

For some businesses, this is a simplified approach. You do not need to prepare typical VAT returns, off-setting VAT charged against VAT incurred. Instead, you charge customers the full amount as any other VAT registered business, but pay a reduced rate to HMRC - currently for photographers, the rate is 11%.

For example, your turnover for the last quarter was £30,000, and you have charged £6,000 in VAT. When you come to report your VAT to HMRC, you instead pay 11% VAT to HMRC (in this example £3,300), keeping the rest. Note: any VAT incurred on expenses are typically not reclaimed via the Flat Rate Scheme.

Too Good to be True?

Yes, and No. As with most things, it depends on your individual circumstances. Typically, you would expect a photographers turnover to exceed expenses, and so the Flat Rate Scheme does provide simplification. Importantly, VAT cannot typically be reclaimed on expenses under the Flat Rate Scheme, and so a large series of smallish expenses incurred may mean the Flat Rate Scheme is not appropriate, and you can't simply dip in and out when is suits.

If you are considering the Flat Rate Scheme however, VAT on capital items over £2,000 can usually be reclaimed (provided it is a single purchase).

Final Thoughts on VAT for Professional Photographers

VAT can be complex, and it is easy to fall foul of the tight timelines associated with registering and submitting returns. If you are a UK photographer impacted by VAT, or considering registration, get in touch for a discussion.

Please Note

This blog post does not take account of the impact of residency of either the customer, you as a photographer (supplier), or your supply of service being other than from the UK.