Share this content

Recording sales made via an agent

What amount do I pay VAT on? Bookkeeping and Accounting!

Didn't find your answer?

I've recently registered for VAT but I'm hoping someone can offer a second opinion as my accountant has advised me of two different things for the same problem...

 

I am an artist - I design and sell greetings cards online - some direct to consumer (Etsy, eBay for example) some through websites where I receive a royalty for any designs which are sold through them.

 

I was recently approached by an agent who takes my work and licenses it to other websites I wouldn't normally have access to (these websites also work on a royalty basis.)

 

My contract is with her and not these websites.  

 

She sends me a report at the end of each quarter detailing the amount of sales I have made on each platform.

e.g. Website 1 - £3k

Website 2 - £2k

In this report she outlines the gross amount, the commission % she will take, and finally the net amount.

 

She has advised that I then need to send her an invoice for the net amount +20% to account for VAT.

 

From a bookkeeping point of view - what amount do I record in Quickbooks and actually PAY VAT to HMRC on?

 

*Background*

I think I'm getting confused because when I make a sale via a B2C website such as Etsy, I need to record and pay VAT on the amount before Etsy take their comission and fees - that's correct isn't it?   

If my agent is sending me a report which includes the amount pre-commission - am I okay to simply record the VATable amount as the amount I actually receive post commission?

 

Replies (15)

Comments for this post are now closed.

avatar
By David Ex
24th May 2022 11:09

jcoombs91 wrote:

I've recently registered for VAT but I'm hoping someone can offer a second opinion as my accountant has advised me of two different things for the same problem...

How much did you pay for the first opinion? If you’re struggling to rationalise what you’ve been told, have you discussed the advice with the person who gave it? That’s what I’d do.

Opinions you pay for from someone you know and who knows you are generally better than “free” ones (assume you’re not offering to pay) from an anonymous Internet forum.

Thanks (2)
Replying to David Ex:
avatar
By jcoombs91
24th May 2022 11:47

Not that it matters but I pay my accountant monthly who gave me the advice, I'm not looking for a freebie :) I have gone back to him for clarity but in the mean time I didn't think it would hurt to ask on here as I was easily able to find the forum on Google and join. I had seen that others had posted similar questions in the past and were given helpful and informative answers. Sorry my intention was never to offend anyone.

Thanks (0)
avatar
By Leywood
24th May 2022 11:24

You want a 2nd opinion, pay for one.

Why is it that people think Accountants and Tax Advisors who have studied for years and have to undertake continous development to keep up to date with tax changes will just give their advice for free?

You sell your product for £ or is there somewhere I can get free bits of paper with some designs and a few commonly used words on them?

Thanks (2)
Replying to Leywood:
avatar
By jcoombs91
24th May 2022 11:42

To be honest I only thought it was okay to ask on here as someone with a similar question had done the same some years ago, advice was freely given at that point with no abuse so I didn't see the problem.

Of course I'm more than happy to pay! I really didn't expect or ask for your abusive comment, otherwise I wouldn't have posted my question.

Thanks (0)
Replying to jcoombs91:
Stepurhan
By stepurhan
24th May 2022 15:21

I would say the response is stern, not abusive, but that is a matter of opinion.

This is a forum for accountants to share knowledge, not a general advice forum for the public. If you have seen a similar question in the past there are a few possibilities.

a) it was an accountant asking the question
b) it is simpler than your query
c) it was at a time when non-accountant questions were rare. People have got tired of being seen as a free advice service. Hence the less than polite responses.

Thanks (1)
avatar
By jcoombs91
24th May 2022 11:52

Apologies to those on this forum that I have offended by asking for advice - I'm unable to delete this forum post but please consider it closed as it was not my intention to offend! I will seek out and pay for this second opinion.

Thanks.

Thanks (0)
avatar
By janitia
24th May 2022 13:50

Hey I thought this was a place to ask questions I dont mind giving my opinions and thoughts here. Pay it forward guys.

Thanks (0)
Replying to janitia:
Stepurhan
By stepurhan
24th May 2022 14:53

Do feel free to practice what you preach.

With a total of 5 answers in your 10 years of membership (including this one and one on a question of your own) your willingness to share your opinions and thoughts is not being demonstrated.

Thanks (1)
Replying to stepurhan:
avatar
By David Ex
24th May 2022 16:05

stepurhan wrote:

Do feel free to practice what you preach.

With a total of 5 answers in your 10 years of membership (including this one and one on a question of your own) your willingness to share your opinions and thoughts is not being demonstrated.

12 years in a couple of weeks!

Plenty of takers and very few givers. Not much of a “community”!

Thanks (0)
Replying to stepurhan:
By JCresswellTax
25th May 2022 10:17

Amazing. hahahahaha

Thanks (0)
Replying to janitia:
avatar
By DKB-Sheffield
24th May 2022 17:13

Agree with others...

What are your thoughts and opinions? If you know the answer, or an answer, now would seem the perfect time to share it.

Incidentally, I have provided *an* answer. It is not *the* answer as there is too much missing information. In fact, the OP is unlikely to receive *the* answer on the information given. If, however, someone were to provide *the* answer to the questions, the OP would arguably be in a worse position than they are now. They would have *the* answer, but that answer may well be wrong due to - potentially material - missing information. Furthermore *who* could they seek damages from? Their accountant? [No!] The 'agent'? [No!] An AWeb username? [Highly unlikely!]

Whilst previous comments may seem harsh, or unfair... they are potentially much fairer (to the OP) than any response that may seem to be helping the OP.

To put it into context, Jason Croke is clearly a very generous guy and a veritable VAT genius! However, on the information given, even he hasn't provided *the* answer. Yet if a contributor named 'FreeVATExpertsRUs' were to come on the thread and provide *the* answer, without further detail, the OP - taking (potentially incorrect) 'advice' from FVERUs, would have been so much better taking the *advice* of DavidEx et al.

Thanks (0)
Routemaster image
By tom123
24th May 2022 15:28

For ETSY sales, the consumer has paid ETSY your list price for your item, so that is your sale value upon which you pay vat.

You also deduct the various fees to arrive at your profit.

When working via a third party, to whom you have licensed your work, they are selling to another user at whatever list price they choose.

My reading of your question is that this is what you are doing already.

Your sales are to the agent / this is the value upon which you should calculate VAT.

Thanks (0)
VAT
By Jason Croke
24th May 2022 15:54

My initial thought is that the agent is wrong, the gross price is your selling price/turnover, she then takes her commission/cut and remits to you the net (ie £100 sale minus £30 commission = £70 net received into your bank)...but your sale is £100 and that is what VAT should be based on.

It does ultimately depend on the contract terms, but usually an agent is just a middleman, they don't sell anything other than their commission fee to you, you make the sale of the art to the customer which the agent handles on your behalf.

You mention in the OP that you've asked your Accountant and has advised you of two different things...it would be useful to understand what these two things are so that we can get a better idea of what you've been told already.

Thanks (2)
Replying to Jason Croke:
avatar
By DKB-Sheffield
24th May 2022 16:37

Agreed, it would be good to know the 2 views of the accountant as they would - likely - be approaching this with a better understanding of the facts.

My question would perhaps be whether the 'agent' is indeed an 'agent' as opposed to 'principal'? The OP's continual use of the words 'agent' and 'commission' may be obscuring the contractual nature - which by the comment in the OP is directly between OP and the (possibly so-called) 'agent'. I admit this arrangement is less common in practice (in the art world) but, it may explain why 'agent', 'accountant' and OP are at odds.

Alas, the contract would likely shed some light on this. Alas, we don't have that 'priviledge' information.

@OP whilst it may seem you have received harsh/ unhelpful advice, on reflection it may prove extremely helpful! You have provided limited information, and have not shared the details of your contract (nor should you!!!). For that reason, any specific 'advice' (as opposed to online *'guidance'*) must be sourced from someone who can review the specifics.

In addition, on the subject of the 'bookkeeping', ask your accountant. They will tell you how they want it shown (for reporting and VAT). I may take a different approach.

Thanks (0)
Replying to Jason Croke:
Routemaster image
By tom123
25th May 2022 09:02

The tricky thing being there probably isn't much of a contract.

If I put my art in a gallery, for free, and it sits there waiting for punters to come in and buy it, surely the gallery owner (who is just a shop keeper by another name) just has my goods on a sale or return basis.

The customer is buying from the gallery.

Are not all shop owners 'middlemen'?

Are we perhaps too keen to use the phrase 'agent' in it's strict legal sense, when in fact really you just have traders in the middle who like to use a fancy title.

Thanks (2)
Share this content