VAT for Disclosed Agents

Hi there

I have a client who will be an agent from a VAT point of view.

He is selling the services of his client on a web site, takes the full money from the customers who visit the web site and then he pays his client less his commission. The client (principle) is known (disclosed).

I have looked at the VAT guide and it seems that this is what he would do:-

He would issue the invoice to the customers and take the money so therefore his taxable turnover would include the price of the service from his supplier.
So in Box 1 the VAT due would be on the entire sale - is that correct.
He would then put the cost of the service to him (which would be the cost of the supplies less 10%) in box 4
is this correct

He should issue a full VATable invoice to the buyer/customer (these are consumers and he is selling hot food)
the supplier should issue him with an invoice for the full amount that was also given to the customer/end consumer
He should issue a VAT invoice to the supplier (principle) for the commission he takes.

If the principle issues the invoice to the end consumer instead of the above scenario but my client actually takes the money from the customer does this mean that in box 1 he just puts his commission?

All sales are to the UK.

When speaking to the VAT office they told me that his commission is the turnover and this is all that should be reported in Box 1, but the VAT guide section 22 onwards describes it differently.
After reading the VAT guide I called them again and they told me that his turnover for VAT purposes is the whole turnover - ie both the sale and the commission.

hence the question

On another point from the point of view of turnover for accounting - is his turnover his commission or the total amount he has taken

If the second option happens ie my client collects the money on behalf of the principle but the invoice is issued by the principle to the buyer - from a bookkeeping point of view how does he set this up.

hope someone out there can help as I seem to be getting conflicting information.


  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?

    My understanding is that his turnover is his commission, and he needs to charge VAT on that.

    The amount he's paying to his supplier (on whose behalf he is selling) is not turnover for VAT purposes (but is for accounting purposes).

    If his supplier is not VAT registered, then the VAT receipt should only show the VAT on commission. If the supplier is VAT registered then I'm not sure how it's supposed to work off the top of my head.

    I don't believe the full sale price is VAT turnover.
  • pirate
    pirate Registered Posts: 469
    Hi Monsoon

    methinks you should write a book - many thanks for your reply.

    spoke to the VAT office again this morning for more clarification. They said what you said above and further if he issues the invoice to the client then he does have to record the VAT in full in Box 1 but if the supplier (ie the principle) issues the receipt then he accounts for VAT only on his commission.

    For turnover they also said if he is taking money in but only issuing an invoice for his commission then his turnover would just be his commission.
    The money from the customer would be a liability as it has to be paid back to the supplier. But this was the VAT office not anything to do with actual accounts.

    If its the other way where he is issuing the invoice then turnover would be the total amount - commission and sale I think.

    anyway love these complex things more to learn
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Sound about right to me.

    I am going to write a book. Actually, I've started. I just find it far more interesting to write fiction in my spare time instead of more accounts!!

    I ought to just somehow trawl forums for all my posts and cobble together something from those :D

    Thanks Pirate :)
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