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VAT pre/post commission

Aesthetics Clinic

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A client has a 50/50 arrangement with a Doctor working in her clinic, I.e my client keeps 50% as a commission for all income taken by the Doctor.

Excluding the whole medical/non medical argument about the actual treatment, for my client do they record the amount for VAT purposes as pre or post commission as the Doctor is not registered and therefore if my client records the net amount (her share) only as income she will be better off compared to of course the pre commission amount.

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By Hugo Fair
06th Dec 2021 22:07

I'll let all the VAT experts raise the standard questions about what is being supplied by whom to whom ... before they can get to the nitty-gritty.
But, as a starter, "my client keeps 50% as a commission for all income taken by the Doctor" ... do you mean patients are paying 100% of Doctor's fees to your client (who retains 50%) OR do you mean patients are paying the Doctor who is then invoiced by your client OR ... ?

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Replying to Hugo Fair:
RLI
By lionofludesch
07th Dec 2021 09:40

Hugo Fair wrote:

I'll let all the VAT experts raise the standard questions about what is being supplied by whom to whom ... before they can get to the nitty-gritty.

Quite. WISWTW is, once again, the key issue.

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chips_at_mattersey
By Les Howard
06th Dec 2021 22:16

Hugo is right.
Who is the private customer contracting with?
Exemption for medical services will probably only assist one of the medical practitioners. The other will have taxable income as a result of the arrangement.
More information please!

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By Jigs
07th Dec 2021 07:22

Thank you both, the client is paying my client who keeps 50% and then transfers the remaining 50% to the doctor (who is operating as a Ltd Co)

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Replying to Jigs:
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By paul.benny
07th Dec 2021 08:56

'fraid you still have to get into the nitty-gritty of the arrangement between the parties. Is Clinic selling procedures and then sub-contracting delivery to Doctor Ltd.. Or is Clinic agent receiving a commission from Doctor Ltd? Or is it something else?

My guess is that the agreement is inadequately documented, if at all - provisions about liability *might* help diagnose the structure.

Agency can be complicated for VAT, and optimising the arrangement may be complex. You need offline advice from a specialist such as Les.

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chips_at_mattersey
By Les Howard
07th Dec 2021 09:31

So, the private client is paying Doctor A, who sub-contracts to Doctor B. That appears to be the contractual position, which should be confirmed by clear written agreements between the parties.
Turning to the actual treatment; the first question is whether it is medical or something different, such as cosmetic, which may or may not be exempt. The second question is to consider the professional qualifications and competence of Doctors A and B, and whether the treatment falls within those competencies.
And, as previously stated, you need such analysis in writing, to provide certainty to all parties.

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paddle steamer
By DJKL
07th Dec 2021 09:51

Interesting that this thread is currently side by side with the Uber case thread on here as both appear to rest on a similar point.

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Replying to DJKL:
RLI
By lionofludesch
07th Dec 2021 10:42

93.7% of VAT cases are about WISWTW? so I'm not surprised at all.

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Jason Croke
By Jason Croke
07th Dec 2021 11:20

You're probably going to need to get proper advice because this is a rabbit warren of concepts that all need bringing together.

I know you have stated "excluding the whole medical exempt argument" and I appreciate you only want to know whether the commission is pre or post but you cannot answer this question by ignoring the fundamental point as to what is being supplied to whom.

What "aesthetics" are being supplied? If the treatments do not meet the medical exemption, that is the starting point for me.

Treatments must i) be within the Dr's medical registration and ii) the primary purpose of the treatment is the protection, maintenance or restoration of the health of the person concerned (see para. 2.3 then 4.4)
https://www.gov.uk/guidance/health-professionals-pharmaceutical-products...

Botox is not a "medical treatment" unless it is part of a defined medical treatment plan issued by an appropriate qualified and registered person.

For example, I visit the clinic and want some lip filler and Botox for the crows feet. What medical condition is being treated (apart from old age and vanity - neither of which are medical conditions)? If I have been recovering from facial surgery following an accident then Botox may well be part of my medical recovery plan.

Dr's will try and argue they are doing the procedure to help the patients "mental health", but are Dr's qualified to give clinical psychological diagnosis and treatment plans? Usually no, the Dr refers you to a clinical psychologist who may then determine low self esteem can be fixed with Botox and filler.

So if you're happy what is being supplied is exempt medical treatments (or a mixture of exempt/taxable), next we have to establish who is doing the treatments. Again, it needs to be a medical professional on a medical register.

Assuming we're happy they are medically qualified and registered to do the treatments and the treatment are clinically required to preserve, restore or maintain health, then we look at the contractual nature.

You replied earlier "the client is paying my client who keeps 50% and then transfers the remaining 50% to the doctor (who is operating as a Ltd Co)", I presume the first client you mean is patient and the patient pays your client 100% fee, your client keeps 50% and remits the other 50% to the Dr (as a Ltd).

So it looks on face value that the patient contracts directly with your client - so your clients fee to patient will be based on whether your client is making an exempt or taxable supply to the patient. You need to now this so that your client doesn't breach the VAT threshold by thinking everything they do exempt.

The fee going back to the Dr, strictly the Dr should raise an invoice via their Ltd for their commission/50% and that will not be subject to VAT but would count towards the Dr's VAT registration threshold of £85k (point is the commission isn't exempt, its a taxable supply but not subject to VAT as Dr is under VAT threshold).

To sort of answer your question, your client is making the sale, not as agent but as principal, all income is theirs, so record it as such (pre commission to use your words) and then the commission paid away to the Dr should be treated as an expense and accompanied by an invoice from the Dr to your client.

For example, I come in for my medically exempt treatment and see your client, they charge me £250 for that, no VAT as exempt. Your clients income is £250

The Dr then invoices your client for their half , so Dr issues an invoice for £125 and your client treats that as an expense of doing business, so in your client accounts you will have £250 income minus £125 expenses and a profit of £125

You need all of this in a contract so that everyone know what the commission is based on, what the VAT status of that contract is plus what happens when your client has to register for VAT (or the Dr has to register), how does the contract wording cope with VAT then? Is the Dr's commission 50% of the net or the gross and remember not everything your client does will be taxable or exempt, depending upon what they are doing for what patient.

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By Charlie Carne
08th Dec 2021 11:27

OK, I'm just going to ask, as I cannot be the only one not to know, but what does 'WISWTW' stand for? (BTW Dr Google doesn't know either)

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Replying to charliecarne:
Red Leader
By Red Leader
08th Dec 2021 11:37

+1

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Replying to Red Leader:
By SteveHa
08th Dec 2021 11:56

"Who is Supplying What to Whom"

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Replying to SteveHa:
By Charlie Carne
08th Dec 2021 12:09

Wow! Is that a well known initialism? This forum tends to get lots of initials thrown about that assume its readers understand them. Unless initials are widely used and well known, I would normally spell them out on first use and only then use the abbreviation thereafter.

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Replying to charliecarne:
paddle steamer
By DJKL
08th Dec 2021 12:12

Tends to be quite common re vat questions on here.

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Replying to DJKL:
By Charlie Carne
09th Dec 2021 12:34

But it relies on all readers having spotted this before, along with the explanation, and then remembering it. The purpose of communication is to be understood. If half (or much more) of your audience doesn't understand your own private language, it's not good communication. I really deplore the trend towards lazy writing. We are not teenagers texting each other, but are meant to be professionals, for whom clear communication should be a core skill.

On Facebook today, someone described a "PNC". I had to look it up (it wasn't on Google, so I had to trawl through previous messages on that particular Facebook group) and discovered that it meant potential new client. How on earth is anyone to know that? Terms like P&L or TB, etc. are well known in the accountancy space, but WISWTW (or PNC) should be written in full the first time so that others can understand what is being said.

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Replying to charliecarne:
RLI
By lionofludesch
09th Dec 2021 12:45

charliecarne wrote:

But it relies on all readers having spotted this before, along with the explanation, and then remembering it. The purpose of communication is to be understood. If half (or much more) of your audience doesn't understand your own private language, it's not good communication. I really deplore the trend towards lazy writing. We are not teenagers texting each other, but are meant to be professionals, for whom clear communication should be a core skill.

On Facebook today, someone described a "PNC". I had to look it up (it wasn't on Google, so I had to trawl through previous messages on that particular Facebook group) and discovered that it meant potential new client. How on earth is anyone to know that? Terms like P&L or TB, etc. are well known in the accountancy space, but WISWTW (or PNC) should be written in full the first time so that others can understand what is being said.

I've written it myself at least a hundred times, Charlie.

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Replying to charliecarne:
RLI
By lionofludesch
08th Dec 2021 12:27

charliecarne wrote:

Wow! Is that a well known initialism? This forum tends to get lots of initials thrown about that assume its readers understand them. Unless initials are widely used and well known, I would normally spell them out on first use and only then use the abbreviation thereafter.

Yeah, I was getting fed up of typing it out in full.

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Replying to lionofludesch:
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By Tax Dragon
08th Dec 2021 12:37

Hugo uses WIBSBWTW?

Which develops to WITTTIBSAWISITW?

But I like W?W?W? It's three questions innit.

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Replying to Tax Dragon:
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By Hugo Fair
08th Dec 2021 13:31

Like it - and can be re-used with all my favourite words, in any combination of your choosing .. What ... When ... Where ... Who(m) ... Why (although I often feel that How gets left out).

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Replying to SteveHa:
RLI
By lionofludesch
08th Dec 2021 12:38

SteveHa wrote:

"Who is Supplying What to Whom"

Well done, Steve.

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