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VAT on Commission?

Hi All,

A client who is VAT registered and charges VAT on its services also recieves commission from a third party vendor for referrels to its service.

What is the correct way of treating this commission? Should this be treated as normal income or is it exempt from VAT? There is no reciept from the vendor stating any VAT.

Thanks guys.


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09th Mar 2012 10:08

VAT on commission

In most cases, commission income is standard rated.

However, things will be different if the underlying supply is VAT-exempt; and/or the parties are in different countries. Can you provide a little more information, please?

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By khalm0
09th Mar 2012 10:27

Letting Agent that refers a Gas engineer to landlords to do Gas Safety certifications. Gas engineer pays a comission for the referred work.


Also a credit reference agency that pays commission for the business to use their service.


All UK parties.


I guess based on your above comment, I would have to treat it as normal income and strip out VAT at 20%...?

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09th Mar 2012 11:21

VAT on commission

Correct! I would seek to negotiate commission PLUS VAT, to maintain the income level; and the referrer can reclaim the VAT, assuming they are VAT registered.

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By khalm0
09th Mar 2012 11:33

Thanks for the advise. make sense! :)

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By fkaim85
25th Mar 2014 13:51

What if the letting agent receives commission from an insurance broker. Insurance does not carry VAT. How should the letting agent treat this income for VAT purposes?



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