Handling commission payments for VAT exempt vendors

Forum Categories GENERAL VAT DISCUSSIONS Handling commission payments for VAT exempt vendors

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    Hi all,

    We sell tickets for events and have a couple of partners who are VAT exempt, but our business is not.

    If we are the point of sale on a £15 ticket, where the vat exempt vendor gets £10 of that ticket price, does that mean we pay the full VAT amount on the entire £15 and must therefore deduct the total vat sum of £2.50 from our share of the sale (£5).

    I’ve asked our Accountant who has a habit of explaining things so technically it’s difficult to know what’s being said.  So any advice here would be greatly appreciated.

    Many thanks

    Trevor S

    The VAT implications are very much dependent on the details of the contract between the parties. Presumably your accountant will have seen this.

    Although you refer to the other businesses as “partners”, it’s quite rare that events are run as a true partnership – which is a very specific legal structure. More commonly, there are separate businesses supplying services to each other, and most of the arrangements I’ve seen have been one of the following options:

    Option 1 – You act as the agent of the other business, selling tickets on their behalf.

    If you are the agent, the sale of tickets (for VAT purposes) is treated as being direct between the other business and whoever you’ve arranged the sale to. If the other business is VAT registered, they (not you) will need to declare VAT on the full sale price (£15 in your example). But if they’re not VAT registered, there’s no VAT for them to declare.

    In your books, you are supplying a service to the other business. The value of your service is the £5 that you keep, and you’re required to treat that as VATable. Whether it’s “£5 plus VAT” or “£5 including VAT” depends on what’s specified in your contact. If your contact doesn’t mention VAT, it’s likely that you’ll have to treat the £5 as including the VAT – so leaving you with £4.17. You should issue the other business with a VAT document for this, as any that are VAT registered could reclaim the VAT from HMRC.

    Option 2 – You are selling the tickets as principal.

    If you’re not acting as the agent of the other business, HMRC treat the arrangement as two sales of the tickets. The first sale is by the other business to you for £10, and the second sale is by you to the ultimate buyer for £15.

    If this is the case, your sale to the ultimate buyer is likely to be subject to VAT in full. So you’ll have to declare VAT on the £15, leaving you with only £12.50. If the other business selling the tickets to you is VAT registered, they should be able to give you a VAT invoice for your purchase. But if they’re not VAT registered, overall you will be worse off with this option than you would under the agency (option 1) above.

    It may be that the arrangements don’t fit either of the options above, in which case you’ll need advice from someone who has sight of the contracts. You could ask your accountant whether they could explain it again, or you could approach a VAT advisor. Either way, get the advice in writing and keep it on file – it will be useful to have in case you ever get inspected by HMRC. And if the advice you’ve been given is too technical, it’s fine to ask them to explain it more clearly!

    Hope this helps!


    hi Trevor,

    That was very kind of you to write such a detailed response, I very much appreciate that – particularly during the holidays.  Thank you.  

    Reading your reply made me realise I should have said Client in place of Partners.  There’s no formal contract as such, just an agreement made by email on a show to show basis.  As we are the point of sale for the entire transaction and they invoice for their respective share of those sales I think Option 2 applies, sadly.  

    How it usually works with other clients is that we work on the basis that we absorb our own respective shares of VAT.  So for example if they get £10 for the sale, they invoice £8.33 + 1.67 VAT per ticket , so that we only absorb VAT on our share (even though we collect it on the entire transaction as the point of sale).  As they are VAT exempt, their expectation is that they will receive the full £10 and that’s the crux of the matter

    Your response has been most helpful and far clearer than my Accountants.   you don’t do accounts do you, haha (joke).

    All best for 2023 and thank you again.


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