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Acting as a selling agent, with respect to VAT

What is required to ensure Company B is correctly acting as an agent for Company A

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Company A is a vat registered business, selling items to consumers and traders.

Company B is not vat registered.

The plan is for company B to sell end of line products, at a substantial discount, online.

Is it possible to state something like "Company B is acting as an agent for Company A, from whom VAT invoices are available if required", at the foot of each website.

I am trying to avoid having to set up the new entity with a VAT registration in the event that any customers of company B want a VAT invoice.

Most of the income would be routed to Company A, where it would be treated as VATable income.

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chips_at_mattersey
By Les Howard
28th Oct 2020 12:29

It needs: (1) suitable contractual agreements between A and B and customers, including those shown on the website(s), and (2) clear indications on the website and other social media and any promotional literature that B is acting as Agent for A.
That will be different if A and B are (1) 'associated' companies, or (2) either party is non-UK based.

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Replying to leshoward:
Routemaster image
By tom123
28th Oct 2020 12:51

Thanks Les,

Company A is owned by my wife, (artistic items).
Company B is owned by me - currently dormant, looking to find a way of offloading old stock.

Both shareholdings 100% individual.

Does that make them associated?

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Replying to tom123:
chips_at_mattersey
By Les Howard
29th Oct 2020 15:55

yes.

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By paul.benny
28th Oct 2020 13:28

Why can't company A just sell the items itself? It can use a different trading style to its normal activity.

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re
By Jason Croke
28th Oct 2020 15:55

You state "I am trying to avoid having to set up the new entity with a VAT registration in the event that any customers of company B want a VAT invoice."

You need to understand the difference between disclosed and undisclosed agents. Useful explanation here https://www.cronertaxwise.com/community/vqotw-agency-status-impact-turno...

and HMRC guidance here in section 22 https://www.gov.uk/guidance/vat-guide-notice-700#section22

You then state "Most of the income would be routed to Company A, where it would be treated as VATable income."

Why only "most" of the income? If Company B is a disclosed agent then the money Company B takes from customer is not B's income, it belongs to A and A declares output tax on that revenue, not net of B's agency fee/commission.

If the agency status is not clear (for example clear contracts as Les has stated), HMRC may take the view the sales are made by Company B and output tax is due on those sales by Company B.

As ever, VAT isn't simple, seek advice, presumably you or your wife have an Accountant? If not, surely it's worth a couple hundred pounds to get it set up right from the start rather than risk the wrath of HMC assessments 2-3 years down the line?

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