Paying a 3rd party company but having to cover the VAT

[Ingredients]

Hi there,
I asked this question on Boards but didn't get a response so I thought of this site as an alternative!

I'm wondering what the best way to go about the following is.

A client of mine is interested in me designing business cards for them and is looking for a price. I want to provide a fully rounded service and look after the design, printing and delivery to minimise the hassle for my customer.

I've gotten trade prices off a printing company which allows me better potential for profit.

I'm as of yet under the threshold for having to be registered for VAT and my accountant advised me to stay unregistered. The printing company are registered though.

So in order to get them to do the business cards, I'd have to pay them which would include the VAT obviously. To make it economical for me I'd have to pass this charge to my client but of course that will make me less competitive.

I had wanted to keep the whole process as streamlined as possible from the clients point of view rather than having to ask them to send payment to the me AND the printing company.

Is there any way around this? Any help would be really appreciated

 

[thetaxguy]

Yes.

Register for VAT.

You have just identified the chief drawback with not registering for VAT. Welcome to the wonderful world of commerce.

 

[DB74]

Is there any way you could get the printing company to invoice your client directly for the amount including your fee. You could then invoice the printing company a finder's fee or something similar. Or the printer invoices the client with their charge only and you charge your client separately for the design work only.

This depends hugely on the relationship you have with both parties though as you could find yourself excluded from future transactions if your client goes straight to the printers.

 

[Paddy199]

DB74, what you describe is Disclosed Agents and Non-Disclosed agents. Of course, Revenue have rules for just such a scenario. Here they are:


A disclosed agent is someone who discloses/represents to his customers that he is acting on behalf of a disclosed principal, and earns a commission on his sales.

• The supply of the goods/services for VAT purposes, is between the principal and the customer.
• The principal raises the invoice to the customer for the supply of the goods/services.
• The commission charged by the agent is a separate supply of services to the principal. The agent will invoice the principal for this commission.
• The agent’s commission will attract VAT at the same rate as the service being supplied to the ultimate recipient.

An undisclosed agent is someone who holds himself out as a principal, even though he is in fact acting on behalf of an undisclosed principal. Where an undisclosed agent is dealing with goods, the undisclosed agent does not take legal ownership of the goods.


Section 3(4) VATA72 provides that supplies of moveable goods through an agent or an auctioneer in accordance with Section 3(1)(aa) VATA72 are treated as being supplies to and by the agent or auctioneer. VAT legislation deems there to be a simultaneous supply to and by the agent. The effect of this is to make two supplies where only one actually (legally) takes place.

• This means that the undisclosed agent or auctioneer must issue a VAT invoice for the goods or services "supplied" by him.
• The agent’s or auctioneer’s commission merges with the consideration for the goods/services being supplied.

Therefore the agent’s or auctioneer’s commission will be liable to VAT at the rate applicable to the goods or services being supplied, (i.e. taxable at either the 0%, 4.8%, 13.5% or 21.5% VAT rates or VAT exempt).

 

[kgrant1]

you could get the printer to bill your client, but that won't look as professional on your part as I presume you want to give the impression that you are providing the whole service to your client. I would bite the bullet and register for vat, as hopefully your business continues to grow, this will become a recurring issue

 

[Niall M]

Wow, dont jump the gun and register for VAT. Have you many clients and are they registered for Vat do you know? If not, and you register, you will have to up your costs to them by 21% or take a hit for the vat portion.