VAT treatment of ageny income

VAT treatment of ageny income

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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)

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By DMGbus
22nd Aug 2013 08:44

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

 

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Replying to RedFive:
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By LancsAccountant
22nd Aug 2013 09:13

Many thanks. I appreciate the comments.

My main concern is the 'customer facing aspect'.

ie Is it necessary for the customer to be given a invoice/receipt with the name of the principal on the document, which is what the HMRC guidance says.

Or could say a sign in the shop saying that " xxx operates  yyy  services as agent for zzz". Would this suffice to  indicate to the customer that an the services are being obtained from an agent.

Many thanks.

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By stratty
22nd Aug 2013 09:39

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

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_CL_000871&propertyType=document#P44_3555

 

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By shaun king
22nd Aug 2013 10:30

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.

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Replying to JD:
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By LancsAccountant
22nd Aug 2013 12:46

Shuaun,

That was my reading of it as well.

It is a disclosed agency, so I'm pretty clear on what we need to do.

Many thanks,

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