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bigduckontax, Accountant
Category: Tax
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I work company which enables hotels to sell gift vouchers

Customer Question

I work for a company which enables hotels to sell gift vouchers online, as part of our service we charge commission per gift voucher sold.
This commission is based on a % of the actual charge of the voucher. On top of our commission we then charge VAT.
So for example an overnight stay voucher is purchased at £100 we charge 10% commission + VAT = £10 + £2 = £12
One of our customers has advised that they do not feel this is correct as we should be charging commission on the net price of the voucher, they feel that we are charging VAT on top of VAT (which they are due to pay HMRC as they are the hotels gift vouchers).
It is stated in our contract that we charge commission + VAT and due to the different voucher VAT rules VAT is not always applicable at time of sale so we don't feel that there is any other way we can do this.
So my question is in your opinion is what we are doing acceptable?
Thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You should be charging VAT on your commission. New Model Adviser [Aviva Investors] have the following advice on the subject: 'The issue of when, and when not, to charge VAT is complicated for advisers. But while there are plenty of grey areas around the subject, what is clear is that the creation of a VAT liability is not directly linked to whether a fee is charged or whether the adviser is paid by commission. It all hinges on the nature of the service provided.' Your company is providing a service so the addition of VAT to invoices is quite correct. It is service which triggers VAT, it is what is done that counts. I do hope that my reply has cleared the air in this matter.
Customer: replied 1 year ago.

Hi Keith,

Thank you for your answer.

I think the main issue here is that the hotel feels that they have already paid HMRC 20% VAT on the voucher and therefore rather than us chargin commission on the £100 they think we should be charging commission on £83.33 and then we can add VAT on to our commission.

They feel that by us charging commission and VAT based on the gross voucher value that in effect we are charhing VAT on VAT.

Thanks

Kate

Expert:  bigduckontax replied 1 year ago.
Hi Kate
You said 'as part of our service we charge commission per gift voucher sold.' That is the service and it is standard rated. You are right, the hotel is wrong. What are they quibbling about anyway? it is reclaimable by them as input tax in any event.
Customer: replied 1 year ago.

Thanks Keith,

I just wanted to be sure where we stood on this one as VAT around gift vouchers always seems so complicated.

The crux of the matter I would say is that because the commission is based on a higher amount, they receive less revenue per voucher, even though they can reclaim the tax on this.

Thanks

Kate

Expert:  bigduckontax replied 1 year ago.
I can see the problem Kate, but your treatment is still correct. Your service is standard rated.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3597
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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