Vat

George
George Registered Posts: 43 Regular contributor ⭐
in General accounting discussion
A prospective new client is running a music agency with a partner, whereby they are engaged to provide music tuition, concerts and events. They pay the musicians on a self employed basis and retain a percentage for the agency service. The agency is fast approaching the Vat Registration threshold on gross fees received. They have previously been advised that they only need to apply for Vat Registration on their retained fees only. That doesn't seem right to me.

Am I right in believing that they should apply for Vat registration on their gross turnover? And, if so, are their payments to their self employed musicians subject to Vat?

Thank you.:001_smile:

Comments

  • reader
    reader Registered Posts: 1,037 Beyond epic contributor 🧙‍♂️
    George wrote: »
    A prospective new client is running a music agency with a partner, whereby they are engaged to provide music tuition, concerts and events. They pay the musicians on a self employed basis and retain a percentage for the agency service. The agency is fast approaching the Vat Registration threshold on gross fees received. They have previously been advised that they only need to apply for Vat Registration on their retained fees only. That doesn't seem right to me.

    Am I right in believing that they should apply for Vat registration on their gross turnover? And, if so, are their payments to their self employed musicians subject to Vat?

    Thank you.:001_smile:

    Re: turnover- I believe registration should be based on gross turnover.

    Re: payments to their self-employed musicians- if their self-employed musicians are VAT registered/providing VAT invoices then input VAT can be recovered.
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
    There are special rules regarding VAT on agency transactions. I can't remember the rules off the top of my head so I don't know if they'll apply in your case, but I do have a client who arranges therapy sessions and he only has to account for VAT on his cut of the sale, not on the amount he passes to the therapist. It was a few years ago that he registered for VAT so I can't remember the ins & outs of it, but worth looking into if you've not done so already.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    I agree with JodieR.

    I think you need to establish whether they really are acting as 'agent' or just using freelancers to fulfill their own contract.

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