VAT threshold and part-exempt supplies

VAT threshold and part-exempt supplies

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Hi all.  I'm not sure with this one and would appreciate any comments:  If a company's income is derived from commission (60%) and consultancy fees (40%) and it's combined turnover is likely to be £100k, then should it register for VAT, bearing in mind that only £40k of its income is Vatable?  Incidentally £60k is derived from sales commissions, which I believe is not vatable.  If that's right, does the £60k count towards the £70k VAT registrations threshold?  If it does, meaning the company would have to register for VAT, can it still qualify for the flat-rate scheme?  If it does qualify, then am I right in assuming that only the vatable element of income is declared on the Return? 

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chips_at_mattersey
By Les Howard
02nd Mar 2011 16:57

Registration

The registration threshold is based on taxable turnover, not total turnover. Do note that, if HMRC challenge whether income should be exempt, that would potentially affect whether the Client should be registered.

For the flat rate scheme, the calculation is based on total turnover, which includes taxable and exempt.

You will need to calculate which is likely to be the most cost-effective route.

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By spidersong
03rd Mar 2011 09:30

Commission

Why do you think the sales commission isn't VATable?

Sales commission is normally VATable, unless it's something like the selling of financial services/insurance and includes an element of service as well, i.e. it includes financial advice or something similar.

There's no exempt group for 'sales commission', the only exempt groups are: Betting and gaming; Burial and cremation; Education; Finance; Fund raising events by charities; Health and welfare; Insurance; Land; Postal services; Sporting services; Trade union membership. So unless your client deals in these and actually provides a service related to them, rather than just introducing parties to each other, or providing advertising or something like that then the service is taxable and would count to taxable turnover. That is unless the commission is outside the scope of UK due to the transactions taking place outside the UK.

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By jilbo
05th Dec 2012 17:17

Travel Consultants Commission

Apologies for reserecting an old thread but it was the most appropriate I could find in my search.

I have been approached by an LLP who operate as travel consultants. The two partners were previously employed by The Original Travel Co Ltd and still operate from the same premises. The equipment still belongs to the Ltd Co and the LLP are simply allowed to use it. A 25% commission is paid to the LLP by the Ltd Co on the sales it generates which covers rent, rates, heat and light. They are also recharged for advertising, telephone and stationery expenses and this is deducted from their commission.

All monies from clients are paid direct to the Ltd Co and the commission is paid to the LLP once a month. The LLP incur a small amount of other expenditure ie postage, advertising display etc and these are the only monetary transactions going through the company as the Ltd Co pay the tour operators.

I am trying to establish whether the  commission is taxable as they may well reach the threshold for VAT registration. The LLP think the commission is not taxable and that they do not need to register. One of the partners was previously in partnership with her husband selling financial services and advice where a lot of their turnover was commission. Their turnover was well over the registration threshold and they were not VAT registered and they are presuming that all commission received works the same way.

I have searched through HMRCs vat guidance and cannot find what I am looking for. Does anyone have a similar client or know whether they should be VAT registered if they reach the threshold? Any advice would be gratefully received.

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