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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Goodmorning Please do you have the cost following

Resolved Question:

goodmorning
Please do you have the cost for the following vat question.
I was a fashion photographer and an artist is using my images for his paintings a direct likeness. My agent is dealing with this artist who resides in the USA and I reside in UK. The artist has agreed to pay a compensation payment as a goodwill gesture, the amount as yet being negotiated by my agent. The payment will be made into my bank account and I will then pay the agent who is not vat registered her fee.
I am vat registered.
Please the question is do I add vat to the compensation to pay VAT.
Please the question is also would the payment be outside the scope of vat.
helen
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Although goodwill is vatable at standard rate, you are being paid goodwill compensation for using your images by an artist outside the UK/outside EU member state.

In these circumstances the payment would not attract any VAT and you should not add VAT to the compensation payment.

The payment is outside the scope of VAT.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

hello thank you.
further question does it matter who receives the payment me or my agent. My agent is not vat registered.

also please which box would the amount be shown in on the vat return

helen

Expert:  taxadvisor.uk replied 2 years ago.
Helen, thank you for your reply.

It does not matter whether you receive the payment direct or via your agent.

In accounting terms you would should the gross values as follows
Box 6 - total value of sales
Box 7 - agents commission/charges

I hope this is helpful
Customer: replied 2 years ago.

thank you.

further question If is turned out legally not to be goodwill but only compensation is it still not taxable.

further question will the signed contract by all parties ie agent me and usa artist suffice for vat records or will I need to produce a vat invoice.

further question please do you know if this is plagerism by the usa artist.

thank you

helen

Expert:  taxadvisor.uk replied 2 years ago.
Helen, thank you for your reply..

Compensation for something you would use in your trade/earn money for it etc would be taxable income.

Signed copy of the contract would support the change. You would be better off to raise an invoice and show zero VAT for accounting purposes..

I am afraid, I can't answer the last question.

I hope this is helpful.
Customer: replied 2 years ago.

Compensation for something you would use in your trade/earn money for it etc would be taxable income.

this conflicting view above now worries me as to whether vat is chargeable.

Question- I only make a living selling my images through galleries normally vatable. If sold outside the eu and the uk vat is normally not applied to the sale.

The payment I wil receive from the usa will be compensation for him using my image for his painting. The payment is a one off payment for him doing this and I dont make a living by doing this.

Please can you now clarify if vat is payable

thank you helen

Expert:  taxadvisor.uk replied 2 years ago.

Helen, thank you for your reply.

VAT is not chargeable because your artist is based in the USA and I have already stated that.

Normally, your customers would be UK based and you would charge VAT on your images.

Compensation for use of image by an artist that is based in the USA would not attract VAT.
I accept this is a one off payment.

I hope this is helpful

Customer: replied 2 years ago.

thank you. Please are you able to email me a copy of your resume of your past working experiences. This was shown when I first came on to the web site but I did not take a copy. This would be good for my vat files.

question-Do you please know in what circumstances the payment would be exempt and not zero rated.

Expert:  taxadvisor.uk replied 2 years ago.

Thank you for your reply.

We are not allowed to email direct to the customer. My past experience is shown in my profile. I am a qualified accountant in practise and have been qualified for over 35 years.

If you were not trading and took photos as a hobby and some artist used your imag efor his/her paintings then it would not constitute income as you had never intended to trade and make money.

As you are in business and the artist is paying a payment for using your image in his/her paintings then it is income and as the artist is based in USA, this is deemed export outside the EU and carry zero rate VAT.

I hope this is helpful.

taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

thank you very much. the amount due to be received is about 10000 dollars and would attract a large amount of vat so your last paragraph was well worth waiting for confirming that it would be zero rated outside the scope of vat. It is very clear and concise.

best wishes

helen

Expert:  taxadvisor.uk replied 2 years ago.
Heln, thank you for your reply.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.

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