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gross sales vs net sales - tipping transactions

we have an app which collects tips for recipients and earns a % fee for our business

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hi - we have a tipping app which allows users to pay a tip to a third party recipient. It works kind of like a marketplace transaction. There is a gross amount which includes the tip and our fee. The tip is then automatically transferred to the third party recipient. The platform we use Stripe levies its own fees which we bear. At the end we have a net amount received, which is the gross amount, less the majority of the amount transferred to the tip recipient, less Stripe's fees  = our net fee which is paid to us. Under UK accounting rules, how should we record this - are our gross sales the actual gross transaction amount, or do we net out the payment to the third party, since we are just collecting their income and passing it on, and record our sales as the gross amount less the majority amount passed on to the third party. Stripe's processing fees would then be a cost of sale and the net of all that would be our gross profit.

Many thanks for your help.  

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By WhichTyler
15th Oct 2019 09:21

Probably depends on the terms and conditions, ask your accountant whether you are principal or agent, and whether the gross income is recognisable as yours under the relevant accounting standards. They should be able to help

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By Adrian Harris
16th Oct 2019 07:49

Dear WhichTyler, I am embarrassed to say this issue is not yet addressed in our terms and conditions and we do not yet have an accountant! Would you be very kind and advise what the treatment would be in both situations? thanks

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Stepurhan
By stepurhan
16th Oct 2019 08:53

The problem with telling you the different potential treatments is that you do not have the knowledge to work out which one applies to you.

This is the sort of issue where the detail can be very important. You are far better off seeing a paid adviser face-to-face who will ensure they have all the relevant detail.

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