Hi, we have started a holiday lettings company that offers holidays in caravans and lodges.
We don't own the properties, we only manage on behalf of an owner and charge hem commission.
The challenge we have is all monies for the holidays go into our business account and are then released to the owner on a monthly basis minus our commission and any monies for cleaning service that we provide.
The problem is, this is then causing us to race towards the VAT threshold as all monies are considered as turnover in the 12 month period, even though 85% is paid back to the owner.
We have had some advise that a Cloent account might be the way to go and we are seeing our accountant in 2 weeks time in support of this. However in order to get a client account you need to get on the anti money laundering register and we are waiting for trading standards to come back and confirm which association we need to register with.
This is all taking a lot of time and meanwhile the monies comming in is growing and I am worried that we will not get a client account in place before we hit the threshold and have to pay against values significantly inflated due to monies not being ours.
I am also not sure if the approach we are taking is a bit overkill.
Any advice on how to tackle this issue?
Replies (11)
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The. VAT outcome will depend on the contractual position. You need to be the agent for the property owners, not the principal making the supply to holiday makers. Your website Ts & Cs and landlord contracts, etc should be clear. Your day to day practice must also be consistent.
I think that your T&Cs need changing. Look on a few competitors’ websites and a see what they say.
I think your missing the point. Yes the issue is how you handle the money, but until your terms are clear as to whether you are the agent or not, then you can't sort the issue of the money.
In other words if your terms are clear then not all the money you receive could be treated as turnover and could be ignored when calculating the vat threshold.
The key word you need to keep stating is Agent.
Nothing to stop you running and accounting via two normal bank accounts in the beginning until you get your client account.
I don't really see the issue. The holiday makers presumably pay VAT, you collect that VAT... isn't it a bit like ALISK's question about a venue's commission?
I am presuming the OP is intending his commission income to remain under the Vat threshold.
Obviously if the holiday rental income is included this would not happen.
These are B2C transactions, so price sensitive, and getting that VAT saving may help
B2C? Isn't C the holidaymaker? I read the OP as meaning that the supplies were to the (commission-paying) park (or maybe caravan etc) owners.
Hi,
...we probably need to tighten our T&C's a little...
This is the fundamental part. I'm sure the wise and experienced people who have responded have grasped your business model.
As Les has pointed out, contracts with both owner and holidaymaker are relevant. And it's not just a case of sprinkling the contract with the word agent. Other terms may be important too, such as who bears the financial risk if the holidaymaker doesn't pay (and what happens to any deposit). The answers themselves aren't important here. As Tom has said, take a look at some competitor terms. And get a lawyer to draft your term. The lawyer probably doesn't need to understand VAT, just the difference between agent and principal.