VAT question

[geogphotos]

I'm not going to name the company but am looking for advice about VAT practices compared with Alamy.

 

As anybody registered for VAT in UK knows with Alamy it is added to our payout and we then have to pay a share to HMRC each quarter. I use the Flat Rate VAT scheme so pay HMRC 16.5%/20 ths ( in the past it was 11/20ths so much more worthwhile but the govt changed it a few years back).

 

This other company - in the copyright infringement business so similar to Alamy in a sense of charging for image use - does the opposite and charges me VAT because they say they are providing me with a service and have no choice. Even worse this company first deducts a large service fee from the payment to them by the infringer, then splits the remainder 50-50 with me, but charges me VAT on the whole 100% not just my share ( excludes the service fee).

 

 

My question is how is it that Alamy adds VAT and provides a self-billing invoice of me charging Alamy for my net royalties commission? We as contributors invoice Alamy, so we are the ones providing the service ( our images) to Alamy,   and not Alamy ( by licensing them) providing a service to us.

 

 

Edited September 5, 2022 by geogphotos

[geogphotos]

My hunch is that we are the copyright owners and are supplying a service to Alamy in the form of the permission/rights to make use of our images through licensing them - they could not do so legally without us giving that authority to them. 

 

Any UK accountants lurking?

[Inchiquin]

You are a supplier of images to Alamy; Alamy is a supplier of licences to the customer. Therefore if you're VAT registered you must charge Alamy VAT on the income you receive from them and they in turn must charge the customer VAT on the licence fee. Normally when you supply goods or services you know the price you will charge and so you can add VAT at the time of invoicing. But when Alamy licence a photo, the photographer doesn't know how much VAT to charge until after the event. Alamy could notify you of the sale and ask you to send a VAT invoice, but HMRC have made it easier by enabling them to create your VAT invoice for you, thus saving time and administration costs. In all other respects the process is exactly the same as any other transaction between VAT-registered entities.

 

Alan

[geogphotos]

29 minutes ago, Inchiquin said:

You are a supplier of images to Alamy; Alamy is a supplier of licences to the customer. Therefore if you're VAT registered you must charge Alamy VAT on the income you receive from them and they in turn must charge the customer VAT on the licence fee. Normally when you supply goods or services you know the price you will charge and so you can add VAT at the time of invoicing. But when Alamy licence a photo, the photographer doesn't know how much VAT to charge until after the event. Alamy could notify you of the sale and ask you to send a VAT invoice, but HMRC have made it easier by enabling them to create your VAT invoice for you, thus saving time and administration costs. In all other respects the process is exactly the same as any other transaction between VAT-registered entities.

 

Alan

 

 

Thanks Alan,

 

What do you think is different, if anything, about the other situation I described where the company is charging me ( the image supplier) VAT when they charge their customer a  fee for a copyright infringement? 

[Nigel Kirby]

Yes Ian standard practice I receive invoices the same as you mention then claim back the VAT on my quarter tax returns. (Not on the flat rate scheme)

Nigel

[geogphotos]

12 minutes ago, Nigel Kirby said:

Yes Ian standard practice I receive invoices the same as you mention then claim back the VAT on my quarter tax returns. (Not on the flat rate scheme)

Nigel

 

 

Thanks Nigel,

 

In reference to this other company it wouldn't matter so much if I wasn't on the Flat Rate Scheme but having looked at it I don't think it makes sense to change to the normal VAT scheme just for them. The Flat Rate Scheme is just so simple but the downside is you only claim back VAT on purchases over £2k. So if I have to pay VAT over to this company I can't get it back. 

[Vincent Lowe]

Back in the day when I was VAT registered I wasn't on the flat rate scheme but didn't find the normal scheme a problem at all.  I used (and still use) Sage Instant Accounts software. When I received the self-billing invoice from Alamy I then generated an invoice to Alamy through Sage.  I didn't actually send it to Alamy, it was purely for accounting purposes.   At the end of the (quarterly?) VAT period I then just generated a report in Sage which laid out all the VAT totals exactly the same as the HMRC page and I just copied the totals over to them.  Only took a few minutes every quarter but that's using 'proper' accounting software which does it all for you.  I wouldn't like to try to do it manually....😏

[geogphotos]

20 minutes ago, Vincent Lowe said:

Back in the day when I was VAT registered I wasn't on the flat rate scheme but didn't find the normal scheme a problem at all.  I used (and still use) Sage Instant Accounts software. When I received the self-billing invoice from Alamy I then generated an invoice to Alamy through Sage.  I didn't actually send it to Alamy, it was purely for accounting purposes.   At the end of the (quarterly?) VAT period I then just generated a report in Sage which laid out all the VAT totals exactly the same as the HMRC page and I just copied the totals over to them.  Only took a few minutes every quarter but that's using 'proper' accounting software which does it all for you.  I wouldn't like to try to do it manually....😏

 

Before converting to the Flat Rate Scheme I always worried if I was doing my VAT returns correctly - that was the main reason for switching to the simplified system. Peace of mind.

 

They have changed the system now so you can't do it direct through the HMRC website but fortunately I can access a simple system through my business bank account with Lloyds. 

 

As you say it only takes a few minutes every three months - still just about worth it at 3.5/20ths to me.