Should an author deregister for VAT?
If you’re already VAT registered but your sales have dipped below the VAT threshold then is it worth staying VAT registered?
Here’s some things to think about.
Advantages of staying VAT registered
You don’t have to worry about whether you need to register for VAT!
An author’s earnings can be quite lumpy so it’s not unusual for a couple of larger advances paid in a short time frame to tip them over the VAT threshold. Don’t forget, the time frame for assessing whether you’re over the VAT threshold is ‘the last 12 months’ so transactions falling into different tax years might still need adding together.
It’s easy to think that your accountant will spot this and alert you but if they’re only doing annual accounts for you then it may be a long time before they have the information.
For example – Jamie gets £40,000 royalties paid in March 2023. These get reported on his 2022/23 tax return. Then he gets paid £50,000 of royalties in February 2024. These get reported on his 2023/24 tax return but he only tells his accountant about them in January 2025 in time to file his tax return. Jamie should have registered for VAT from 1 April 2024 so he’ll be almost 10 months late if he is relying on his accountant to spot that he’s gone over the threshold.
You can recover VAT on things you buy.
For an author this is typically VAT on agent commissions, accountancy fees, computers and IT costs, advertising and general office costs. For example, you buy a computer for £600 so you save £100 in VAT.
This is money that would be lost if you are not VAT registered. If you look at Box 4 on your VAT returns this is typically the amount of money you have recovered in a VAT quarter.
Your records are better
We find that clients who are VAT registered keep better records than if they aren’t VAT registered as the quarterly reporting that’s required means they have to look at their accounts more frequently. This means that things don’t get lost or out of hand. Better records usually means less tax and less of a surprise when the tax figures are prepared.
Disadvantages of staying VAT registered
You may be losing money on some jobs
If you are doing work for some organisations that are not VAT registered then you might find that you are suffering the VAT. For example, a local organisation that isn’t VAT registered pays you £240 for a personal appearance at an event. If you are not registered then you’d get the whole £240. But, if you are VAT registered you’ll be paying £40 over to the VAT man.
Most authors will get most of their money from sources where they can charge VAT (like publishers) or don’t need to charge VAT (like overseas publishers) so this won’t necessarily be a problem but everyone’s circumstances are different.
You won’t need to pay your accountant to do VAT returns
For our clients there’s a monthly fee for preparing VAT returns together with a fee for the software we need to submit the returns to HMRC. Typically this is about £35-£40 a month. You’d need to look at whether the costs saved are more than the VAT lost.
In summary, you need to look at your individual circumstances to decide whether you will be better or worse off deregistering for VAT.
