VAT threshold - impacts on freelancer co-operation?

We deliver co-operative development support and we're actively keeping below the threshold at the moment, but we are likely to break it next year. We have won tenders on the basis that we didn't need to charge VAT. Larger delivery frameworks like the Hive will happily fund work plus VAT but our charging of smaller clients (often at mates rates) would be seriously impacted once we have to charge VAT - in practice we'd probably just suck it up ourselves - something we can ill afford to do..

Worth bearing in mind that some consortium co-ops are delivering education or social care that is treated differently.

A VAT exemption for co-operative consortia would be useful I think.

I would support Mark's comments. Lots of people I know that work for themselves try to stay below the threshold, especially if their customers are not businesses. In a B2B setting it's much less of an issue, but when you are selling to individuals it makes you a lot more expensive.

The other problem is for those that
deliver to business that are outside the scope of VAT and so can't
be VAT registered, specifically to Housing Co-ops who would
therefore have to pay the extra VAT

thanks

Andy

I endorse all the above comments (been saying this for years). However, I don't see how an exemption for freelancer co-ops would be accepted by HMRC /the business lobby . It would be "an unfair advantage": "Why should this bunch of freelancers who don't even have to pay Employers NI be able to undercut us by not paying VAT?" We would also need to consider the implication of lots of accountants (plenty of crooks out there) advising businesses to appear to be consortia co-ops purely to avoid VAT. The knock on implication of creating an incentive for further erosion of workers' rights concerns me. If a group of freelancers combine and are concerned about VAT they could adopt a marketing co-op model where the income flows to the freelancer and they pay for the marketing service rather than all monies flow through the co-op.

@nathanbrown the reason that VAT should not be chargeable on a collective of freelancers is that it intended as tax on middlemen - it's the tax on the difference between what you buy (labour and materials) and sell (products). Workers in co-ops provide their labour like other freelancers - they are not middlemen buying labour at one price and selling it in another.

Also, the 'marketing co-op' model works in some sectors, but less well when you need insurance etc. Also, people booking a wedding band don't want to get five different invoices.

Also, this should only apply to worker co-ops - consortia of businesses do act as middlemen, and should pay VAT.

A worker cooperative is not a freelancer or marketing cooperative. In a worker co-op the members are employees.

There isn't really such a thing as a thing as freelancers' co-operative in my opinion - if you're a member of a co-operative and work through that then you're by definition not 'freelancer'. Everyone at Outlandish is either self-employed or an employee on a zero hours contract - we're a worker co-op where people act as if they're freelancers.

As I understand the thread it's about helping freelancers by helping/encouraging/enabling them to set up co-ops and take collective action. IMO this should refer to worker (and freelancer-style) co-operatives and not secondary co-ops, consortium co-ops, consumer co-ops, etc. - at least not in the sense that we should argue any of those groups should be excluded from paying VAT.

@harryrobbins by 'freelancer' I mean self-employed in whatever form that takes, whether that's just an individual registered with HMRC or someone who uses a limited company , just not a worker or an employee. IN other words: someone who could be required to be VAT registered if their business income exceeds £85k. Since 'freelancer' is perhaps subjective, I maybe should not have framed it that way, but most people get the shorthand.

I thought that what you were interested in was whether or not the VAT costs that could arise from self-employed people co-operating could be an additional 'cost of co-operation' that A) deters more such co-operation and B) should be reduced/eliminated in some way.

Why would that not apply to consortia of self-employed workers? If the consortium co-op provides a service that augments their work in some way, like helping then find work etc, then is that not relevant? And what about a co-op that provides back-office support and a platform for mutual aid to self-employed workers, but does not necessarily form part of their day-to-day work as such? In your view, relevant or not?

ignore that smiling guy he's not relevant

@harryrobbins On VAT being a tax on middle-men, is it not more specifically a tax on processes that add value between inputs and outputs? In some ways everyone's work is in the middle between these two things, even primary producers like farmers (unless they somehow manage to be 100% self-sufficient, and even then they are adding value to nature - or not as the case my be, but anyway..). What I'm saying is, maybe VAT is NOT a tax on middle-men in the supply chain but a tax on processes that add value. Even if there is no middle man between a self-employed jewelry maker and her customers, if she is really successful and earns £85k> she has to be VAT registered. If a worker co-op (comprised of self-employed if you include that in your definition, workers or employees) performs and benefits from value-adding processes that the members would not be able to undertake on their own, why should that not be subject to VAT? When humans work together it adds value that it would be hard or impossible for them to generate individually. People benefit from working together and the Exchequer says it should get a bit of that too. Why would special treatment be given to worker co-ops and not to partnerships that go about adding value in similar ways? And if it's really about labour-intensive processes that add value, then is this not more a case for a different VAT treatment for these processes/types of work, rather than whether or not co-operation is involved or not?

Sorry, a lot of questions I know, but I need to understand where you're coming from a bit more. Lets test this as much as we can.