Accounting for VAT on commission receipts

Accounting for VAT on commission receipts

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I'd like some help on  a VAT issue if anyone can be kind enough to spare some time to help.

Where I work we've done one of those groupon-type promotions. We've received a nice big cheque at the end of it and I need to account for this correctly.

Let's say the commission rate is 30% (of gross revenue) and gross revenue is £100. 

They have sent us a sales invoice that says their fee is £30, and VAT on this is £6, so we've banked £64. So far so good. But how do I account for the VAT?

My thought is that I should account for sales VAT as £100 x 1/6 = £16.67 and so have in the books:

Net sales  £83.33

Commissions paid £30.00

then on the VAT return sales VAT of £16.67 and input VAT of £6.00

Does this sound correct?

Replies (3)

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Quack
By Constantly Confused
06th Feb 2012 16:57

I might be going off at a tangent here

But to my eye I need to ask: how does this all work?  Have you sold £100 of vouchers to people (worth, I assume, over £100) and then had to pay the third party £30 for being allowed to do this?  Or has the £100 come from elsewhere?

Vouchers are tricky things for VAT and I'd hate to mislead you.

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By ajnmx
07th Feb 2012 07:32

Thanks for responding

No we don't sell the vouchers, the third party company (e.g. groupon) does this. They sell the deal as a voucher to the consumer and take in £100. Then they deduct their 30% commission and send us a cheque for £64. Their invoice to us for this looks like this:

 

Sales Invoice

commission at 30% on gross revenue of £100      £30.00

VAT total                                                           £ 6.00

Total                                                                 £36.00

 

So I account for the sales VAT included in the voucher price (£100/6 = £16.67) and have the £6.00 from this invoice to deduct as input VAT.

Does this make sense?

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Replying to DJKL:
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By punitmshah
22nd Mar 2013 18:11

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