Hi,
I hope someone can help with this.
At its simplest, my (UK limited) company has entered into a contract to supply VATable services to another (UK limited) company. So for each £'000 of services provided I would normally expect to invoice for £1,200 inc VAT and pay the £200 over to HMRC in due course. So far so good.
The complication is that the transaction was introduced by an agent. My company has a separate contract in place with this agent which provides 1) for the agent to be paid a commission of 15% of the value of transactions introduced and 2) that payments made by my customer are routed via the agent. The purpose of 2) is that the agent deducts the 15% commission which is due and remits the net balance to my company - this is provided for in both the contract my company has with the customer (to make payments to the agent) and with the agent (to deduct the agreed 15% commission). (I don't like this arrangement but it does seem to be market practice in this sector.)
I had assumed that my company would invoice the customer for e.g. £1,200 and that the agent would deduct £150 plus VAT of £30 (subject to an invoice for this addressed to my company) before remitting the net amount of £1,020 (being net Sales of £850 plus VAT of £170) to my company. Despite having received the net amount, I had assumed that I would record a Sale of £1,000 (plus VAT recoverable of £200) and an Expense of £150 (plus VAT payable of £30).
The agent tells me that my assumption is not their usual practice. Their way of working is to invoice the customer for £1,000 plus VAT and then to invoice my company for the agreed £150 commission plus VAT. But having actually received £1,020 I need to account to HMRC for the £200 recoverable/£30 Payable and even if I net these two and file a return to recover £170 don't I need to have appropriate invoices to back this up?
It seems strange to me, in the first place, that the agent would issue the customer invoice when they (the agent) are not party to the commercial contract. And also that having received the VAT from the customer that they then do not account to HMRC for the gross amount, yet expect my company to do so although my company has not issued an invoice.
Am I overthinking this? What would the experts here recommend to be the correct procedure/invoicing/accounting?
Thanks in advance,
xdb
I hope someone can help with this.
At its simplest, my (UK limited) company has entered into a contract to supply VATable services to another (UK limited) company. So for each £'000 of services provided I would normally expect to invoice for £1,200 inc VAT and pay the £200 over to HMRC in due course. So far so good.
The complication is that the transaction was introduced by an agent. My company has a separate contract in place with this agent which provides 1) for the agent to be paid a commission of 15% of the value of transactions introduced and 2) that payments made by my customer are routed via the agent. The purpose of 2) is that the agent deducts the 15% commission which is due and remits the net balance to my company - this is provided for in both the contract my company has with the customer (to make payments to the agent) and with the agent (to deduct the agreed 15% commission). (I don't like this arrangement but it does seem to be market practice in this sector.)
I had assumed that my company would invoice the customer for e.g. £1,200 and that the agent would deduct £150 plus VAT of £30 (subject to an invoice for this addressed to my company) before remitting the net amount of £1,020 (being net Sales of £850 plus VAT of £170) to my company. Despite having received the net amount, I had assumed that I would record a Sale of £1,000 (plus VAT recoverable of £200) and an Expense of £150 (plus VAT payable of £30).
The agent tells me that my assumption is not their usual practice. Their way of working is to invoice the customer for £1,000 plus VAT and then to invoice my company for the agreed £150 commission plus VAT. But having actually received £1,020 I need to account to HMRC for the £200 recoverable/£30 Payable and even if I net these two and file a return to recover £170 don't I need to have appropriate invoices to back this up?
It seems strange to me, in the first place, that the agent would issue the customer invoice when they (the agent) are not party to the commercial contract. And also that having received the VAT from the customer that they then do not account to HMRC for the gross amount, yet expect my company to do so although my company has not issued an invoice.
Am I overthinking this? What would the experts here recommend to be the correct procedure/invoicing/accounting?
Thanks in advance,
xdb