We have taken on a new client who is an entertainment agency.
The scenario is that they take the booking for the 'act's - and invoice the end user and when they are paid, they keep a percentage and pass the rest on to the act.
They say they have been previously advised that their turnover is the difference between what they are paid and what they pass on (effectively their commission) which means they are well under the threshold for VAT.
This doesn't seem right to me - surely if their invoice is to the end user - that whole amount is classed as their turnover and would be subject to VAT??
Any advice or similar experiences would be appreciated.
Many thanks
Nicky
Replies (10)
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the monies billed are the individual clients
And they should advise agencies if they are registered for vat, on receipt the monies they should go into a client account. The agencies turnover is what it bills the client and this should be transferred from client to office account on payment to client, see employment agencies regulations
Their original could well be right.
Where the supply is a service the VAT position is never straight forward. A travel agent client was allowed to deregister from VAT because the commission was under the threshold. The position was exactly the same as your client He invoices the traveller for the full value and pays the airline the nett fare, thus retaining the difference
its not the same the travel agent works under TOMS
or would if it had enough margin , the Artiste Agency does not work on that basis
The usual arrangement with theatrical agencies is that when they bill for the services of their client Artiste the invoice is phrased as if it comes from the client Artiste and not the agency itself.
The invoice would state that payment of the invoice should be made to the agency.
If the Artiste is VAT registered then the Artiste's VAT number should be shown on the invoice and VAT added where appropriate. Obviously, for those Artiste's that are not VAT registered then no VAT is added to the invoice.
When the amount invoiced is received by the agency then this should be banked into a clients' bank account. Commission (and VAT on commission if the agency is VAT registered) should be deducted by the agency at the relevant percentages and the net fee (after any other deductions made by the theatre/broadcaster) paid to the Artiste. If VAT registered, the agency should provide a VAT invoice to the Artiste in the normal way showing the commission and the VAT on commission charged. At the end of each month the commission (plus VAT on commission if relevant) should be transferred to the agent's office account.
In this scenario the agency is acting as the Artiste's agent and their turnover for VAT registration and accounting purposes is their commisssion only.
What you seem to be suggesting is that the agency you are dealing with is issuing an invoice phrased from the agency itself to the theatre/broadcaster. If this is the case then my view would be that the agency is acting as principal and, in which case, their turnover would, for VAT registration and accounting purposes, be the total amount billed. The payments to Artiste's, net of VAT, would then be a cost of sale in the agency's accounts.Their gross profit would then be their commission. If an Artiste was VAT registered then the Artiste would then have to provide a VAT invoice to the agency for the VAT on their gross fee.
I would, therefore, be worried that the agency you are dealing with is using the latter method and acting as principal with the result being that their turnover for VAT purposes would be the total amount billed by them to theatres/broadcasters etc.and, if this turnover has breached the VAT registration threshold, the agency should be VAT registered.
As Sir Nicholas of Carnmores has said there are no special VAT schemes for theatrical agents as such, and it's certainly nothing to do with TOMS. Agents can, if VAT registered and depending on the usual turnover thresholds, use cash accounting, join the Annual VAT Scheme and the VAT Flat Rate Scheme if they wish..
Perhaps they should change their accounting system if it's not too late?
TOMS
I am not clear as to what part TOMS plays here. My client is a retail travel agent NOT a Tour Operator . He is thus not subject to the Tour operators margin scheme
Quite
I am not clear as to what part TOMS plays here. My client is a retail travel agent NOT a Tour Operator . He is thus not subject to the Tour operators margin scheme
You're right. TOMS isn't for travel agents. It's for traders who run the holidays.
Contract
Surely you need to look at the contract here.
But, I have to say that, in my experience, the unregistered artiste usually gets his fee with no VAT added, less a VAT bearing commission from the agent.
TOMS can often be for travel agents
just depends, as does whether an atriste is above the VAT treshhold, depends on how successful they are
TOMS does NOT apply to a retail travel agent UNLESS there are add- ons to the travel ticket like Car Hire, Hotel accommodation etc and then only on the add-ons. Commission on airline tickets is Zero rated. ABTA extracted that concession from the VAT Office 15 years ago.