Consignment Stock VAT Treatment

We're trying to work out how to manage VAT as a third party agency managing TikTok Shop's for brands

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We're a TikTok Shop Partner Agency that's planning to work with brands to allow them to sell on TikTok Shop. To note, we have a warehouse to complete the pick, pack & dispatch for our brands, however, WE DO NOT own the stock, we would simply work on a consignment model. The end Customer pays TikTok Shop for the product, we, the TikTok Shop Partner Agency then pick, pack and dispatch the order. To note, TikTok Shop DO NOT pay the VAT on the product to the VAT man. They take off their commission (5%) and the rest is then sent to either the seller or the Partner Agency (us). 

Now, the question is how do we navigate this within the rules of UK VAT. The options as I see it are: 

option 1. We (The Partner Agency) receive all monies from TikTok Shop, we then remove our commission for managing the shop, and pass all the rest back to the client, providing them with a statement of sales so they can reconcile against their books and pay the VAT owing. 

Option 2. We (The Partner Agency) receive all the monies from TikTok Shop, We then remove our commission, and pay the VAT on the products sold and pass the remainder back to the client. 

Option 3. The CLIENT receives all the monies back to them from TikTok Shop (minus TikTok Shop's % commission) we then provide a statement of sales so they can reconcile and pay the VAT owing on the product. We then charge the client for our commission who then pay us. 

I would be really interested in hearing your thoughts on how best to work this and if there's another option possibly that we haven't yet considered. 

Replies (3)

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By David Ex
07th Apr 2024 14:50

lukejamesdigital wrote:

... if there's another option possibly that we haven't yet considered. 

It appears you haven't considered paying for professional advice which would be the most sensible option. You don't give your stock away for nothing; accountants don't give their advice for nothing. That's how business works.

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By Jason Croke
07th Apr 2024 15:27

There are several options and possibilities but will depend on the precise facts of the situation and the contractual relationships in play.

Not sure I would refer your setup as being "consignment stock" that means something quite specific in VAT law.

Not sure I agree that TikTok is not paying VAT? Are they not an OMP if they facilitate the sale of goods between a seller and a customer?

Speak to your Accountant as they'll need to see contracts and relationships between the parties to get the right answer.

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By Paul Crowley
07th Apr 2024 17:17

You really need so much advice that this really is not the place. VAT is the most complex tax.
You need personalised advice as the advisor needs so much more information and answers to questions that you would not want posted publicly

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