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I need a proper explanation on charging of VAT

Kindly advise on how an advertising agency should charge VAT on production and commission.

Good day, 

Please I have no proper understanding  on how to charge VAT on the invoices we send to clients. 

 

I work with an advertising agency, we do production and we advertise for clients, the production and design is dome by use and the media advert is always done by directly by the radio company we only get our own commision. 

Please how am I supposed to charge VAT on the invoice that has production, advert and commision at the same time. For example a company want to do an event., the production and design of fliers of $500 was done directly by my company, the public advert of the event after we have designed and produced the fliers will be done by a radio and TV station for $1,000 we are only standing as an agent, still on the same invoice, we charged agency commission of 10% on $1,500.00 =$150. Total cost invoiced =$1, 650.00 please what will be the VAT element and how will it be charged. 

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By tom123
03rd May 2017 07:03

I struggle to see the difference between production of fliers in house, and subcontracting the radio station to do the advert, personally.

Who is the radio company invoicing?

I would be charging standard UK vat on all my sales invoice to the customer, and treating the radio production of cost of sales.

Why have you written $ - presumably you meant £, and also presumably all work is UK based.

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to tom123
03rd May 2017 07:50

The radio company is invoicing us because the have nothing to do with our client. We only us them to Air our clients adverts after we have done our design. We stand as the middle man between our client and the radio company. And we get commision for our service from our client. So how do we charge VAT in the invoice we are sending to client? Will VAT be charged on the commision only? Or on design only, since that is what we are doing in house? Or will it be charged on the total cost I. E total cost + our own commision. (including amount they will pay us for the radio advert that will be done by the radio stations)

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03rd May 2017 07:16

We don't do radio and television advert. We are agent in that aspect we only deal with production and designing of fliers in house. Every thing that has to do with advert is always given to the television and radio channel. We only get commision on it. If we are to charge VAT, are we charging VAT on the commision alone or we are charging VAT on the production and design, the radio advert and commision itself. P

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By NeilRH
to Ojbusman
04th May 2017 09:00

Usman Ojabanjo wrote:

We don't do radio and television advert.

And Sainsbury's don't make petrol but they still charge you VAT on it!

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to Ojbusman
04th May 2017 11:33

Usman Ojabanjo wrote:

We don't do radio and television advert. We are agent in that aspect we only deal with production and designing of fliers in house. Every thing that has to do with advert is always given to the television and radio channel. We only get commision on it. If we are to charge VAT, are we charging VAT on the commision alone or we are charging VAT on the production and design, the radio advert and commision itself. P

If the very plain answers are too complex for you, just say.

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03rd May 2017 07:27

You need to work out Who is supplying What to Whom?

It's the key to all VAT questions. Well, most of them.

These fliers could be zero rated. Tell us more.

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to lionofludesch
03rd May 2017 07:41

My company is an advertising agency. We do design in house only. We have other companies doing production for us and another company doing radio and television advert.

We get contract directly from clients that somtimes include designs, production and advert. For example a company wants us to make a design for them, print the design and advertise it on their behalf to the public. We will be the one to raise an invoice for the whole job and still charge 10% commision as our agency fee. We will give the production company to produce after we have designed and take the designed copy to the radio station for radio broadcast or TV stations. But all the cost will be paid directly to our company's account. Our own is to settle the printing company and the radio / TV company. So how do we charge VAT here? Is it on commision alone? Is it on design alone since that's the only thing we are doing directly our selves? Is it on the total cost invoiced for?*
I really need to understand this.

Thank you as I await your positive response.

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to Ojbusman
03rd May 2017 08:58

No.

The customer is dealing with you. His contract is with you. His recourse, should there be a dispute, is with you.

The suppliers supply you, not your customer. If you don't pay, they'll come to you, not your customer.

You must charge VAT at the appropriate rate on the whole invoice.

The fliers sound zero-rated though.

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03rd May 2017 07:32

We don't do radio and television advert. We are agent in that aspect we only deal with production and designing of fliers in house. Every thing that has to do with advert is always given to the television and radio channel. We only get commision on it. If we are to charge VAT, are we charging VAT on the commision alone or we are charging VAT on the production and design, the radio advert and commision itself. P

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to Ojbusman
03rd May 2017 10:30

you are supplying a radio ad to your client, so VAT is due on the total cost. In addition you are charging your client a commisssion which you could either add to the cost of the ad and fliers etc or bill separately. In either case VAT is chargeable depending on where your customer is established.

As you are making a supply of the radio ad to your client you have the right to deduct the Input VAT.

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to Ojbusman
03rd May 2017 10:58

Usman Ojabanjo wrote:
We only get commission on it. If we are to charge VAT, are we charging VAT on the commission alone or we are charging VAT on the production and design, the radio advert and commission itself. P

I can't really make it any plainer than "VAT on the whole invoice", which you've been told more than once.

You don't get just the commission. You've stated that you get the whole amount paid by the customer. Sure, you've got expenses, but that's nothing to do with how much VAT you charge.

However many times you ask, the advice isn't going to change.

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By tom123
03rd May 2017 10:34

Why are you reluctant to treat the whole thing as turnover?

Are you mainly dealing with non registered customers?

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By Ruddles
04th May 2017 09:18

Surely your company has a tax adviser that can assist, once in possession of all of the facts?

An Internet forum is no place for advice on what can be a complicated area of VAT.

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