If a business takes money, as an agent for third party, ( eventually ending up with only a commission on the sale) does any one have any ideas as to the best method of recording this The requirement is to avoid the VAT-man adding the total received to sales and possibly breaching the registration threshold.
HMRC guidance states that there must be an agency agreement in place (easy enough), but also that the invoice/receipt to the customer must state the name of the actual principal. The customer would then be fully aware of who they are purchasing from.
any suggestions would be appreciated.
Many thanks.
Replies (5)
Please login or register to join the discussion.
Client account
My personal preference would be for a "client account" (bank account) to be operated where the transactions would be limited to:
Paid in = money received on behalf of clients
Paid out = payment to client net of commission
Paid out = Commission transferredv to main opertating bank account
If possible bank charges (if any) to be charged to main operating account.
Two advantages arise from the above recommended proceedure:
It demonstrates handling money on behalf of clientsAt any one time the balance represents (and records) money owed to clients
VAT Notice 700/34
If you are supplying temporary labour and effectively invoicing for salary + margin then I believe you charge VAT on the whole amount.
See
Two agent routes
For VAT purposes you can be treated as a disclosed or undisclosed agent. For a disclosed agent then the supplier invoices the customer direct and the agent separately invoices for his services or if the agent is acting as an undisclosed agent he is treated as supplying the goods. So in your instance the sale must be by the supplier and invoiced by him and not the agent.