Tuesday, 23 October 2012

The Secret is Out: Indirect Tax & VAT Savings Revealed

Since we have published "Issue 1" we have received higher than expected interests and this only means more pressure to keep these flowing but only if you promise to keep your likes  and comments coming. With that said "Issue 2" is below for your reading pleasure. 

Issue 2: Are you an Agent?
No not double agent, I am referring to those hard working individuals who sell goods or services on behalf of a principal for a commission. 

My firm recently got a client that got frustrated with his previous accountant because they submitted his returns to HMRC late… twice. After receiving all his documents and reviewing his VAT returns we realised that he had been paying way too much VAT to HMRC. No he is not the generous type, he just wasn't clear on the VAT rules.

This is what happened: My client (who will be referred to as 007) acts as an agent for Company A. 007 finds a customer ”X” who is willing to buy the products of Company A. Unfortunately “X” is currently tied into a contract for a similar but older equipment with Company B. In order to get the sale, Company A agrees to pay the early termination fees that “X” will have to pay to Company B.  

Now in order to get things going 007 raises an invoice to Company A for his commission and the contribution towards the early termination fees.  The mistake 007 made was charging VAT on the whole lot (maybe he should stick to acting). In this instance VAT should only be charged on the commission.  

For HELLP with the above contact Marlon Appleton

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