To VAT or not to VAT – that was the question.

It wasn’t tough to make the decision to register for VAT in 2012 because we had no choice! It’s quite hard to try to skirt under the limit, as it’s a rolling 12-month total and the moment you go over it, you need to register. We knew we were coming close but it hit us sooner than anticipated and we had to register whether we wanted to or not. The decision to deregister was a little bit harder. We have, however, very recently deregistered from VAT.

We eventually came down on the side of deregistering for a number of reasons. First and foremost was that a large number of our clients requiring transcription services were either not VAT registered or worked for universities/institutions who could claim back VAT and did claim back VAT, but the VAT was claimed back at the end of the year and disappeared into university coffers, never to be seen again by the department whose budget we had been paid out of! (‘Ah’ said a friend of mine at a certain southern university that shall be nameless, ‘That would explain why my department is suffering redundancies while the finance department is getting plush new carpets.’  Well I don’t know about that, but something doesn’t seem right!) Don’t get me wrong – not all universities do this – but a very large number, it appears, do. For those people, when we had to register in 2012 our prices suddenly went up by 20%. Of course they didn’t really, in that we weren’t making a penny more in the way of profit, but the effect on those clients was nevertheless a 20% increase in our transcription prices. In times of recession this clearly isn’t acceptable and it’s not something we like to do to our clients either!

Another important point is that most transcription companies never face this barrier because they are one-woman bands and are unlikely to have a turnover requiring VAT registration. We are an office of three people with others who sometimes subcontract for us in busy periods. This allows us to provide a very flexible, speedy and expert transcription service, as we have around 50 years transcription experience between us in the office, but it also means we can work for more people at the same time so our turnover increases compared to those one-person-in-a-home-office businesses.

Because of that our ‘competition’ are largely not charging VAT. Those that are perhaps work mostly for organisations that can claim VAT back, and for those there is no issue. If we don’t charge VAT, fine; if we do charge VAT they simply claim it back at the end of the year. As explained above, this has not been the case for our university, charity or individual clients. Consequently our competition suddenly appeared significantly cheaper than us.

On top of this, in April the limit in the amount you can earn before VAT needing to be paid went up substantially and we were able to come under that limit again. We have therefore deregistered and, for those clients who were affected, our prices have come down again by 20%.

To those of you who were able to stick with us through this period, thank you very much! For anyone who wasn’t able to, we completely understand – and we hope to see you back soon!

 

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