I am setting up an online marketplace for products. These products will be from a number of small producers. I am currently evaluating the options for the business model.
Current thoughts are: consumer buys a VAT rated product from the site, the marketplace pays for postage, provides packaging, covers the payment processing costs & takes a commission to cover marketing / people / other operational costs. The producer then sends the product directly to the consumer using the postage provided & is then paid the remainder of the sale price (Sale price inc. the VAT, minus postage, packaging, payment & commission). The contract from the sale is between the consumer & the producer, we just sit in the middle. I am lost in trying to understand the impact of VAT on this transaction. As I understand it:
Sale price inc. VAT (VAT responsiblity passed to producer)
Postage cost: can be treated as a disbursement & is therefore not VATable on the invoice from the marketplace to the producer
Packaging cost: can be treated as a disbursement & is therefore not VATable on the invoice from the marketplace to the producer
Payment processing: not treated as a disbursement & is therefore VATable on the invoice from the marketplace to the producer
Commission: not treated as a disbursement & is therefore VATable on the invoice from marketplace to the producer.
Does this make sense? Am I correct in thinking these are disbursements? I'm primarily trying to understand this model's profitability vs. the model whereby the consumer has a contract with the marketplace, and technically at the time of purchase the marketplace buys the product from the producer for a defined price & then the producer still ships to the consumer (using postage etc., which is covered in the margin)
1 further question:
1) If both the marketplace & producer are below the VAT threshold, we wouldn't have to charge VAT on any of the transactions between the marketplace & the producer, or the producer & the consumer. However, if the producer was VAT registered & the marketplace was below the threshold, we would have to charge VAT on the sales price & pass this on, but we would not have to charge VAT on the commission.
I hope this makes sense. I'd really appreciate any help on this as it has been racking my brains!