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Sam, Accountant
Category: Tax
Satisfied Customers: 14154
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I sell a service to non business customers and am vat registered.

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Hi I sell a service to non business customers and am vat registered. The service content is supplied to me by free lance individuals (not vat registered)
I am in dispute with one of my freelance supplies who thinks I am underpaying him.
The dispute is by the by because he agreed the pay before commencing but he is also disputing I deal with the VAT and I want to clarify that I'm not doing anything untoward.
My agreement with him is that I pay him a percentage of the income from sales after vat.
So for simplicity lets say I am selling something for £120, I pay him a percentage of £100 on the basis that the real selling price is £100 + vat.
He thinks he should be getting a percentage of the £120 because of some rule that says I don't have to deduct the vat when paying a freelance partner.
Is there something I have missed?
Hi Thanks for your question The first matter that I should highlight is under what guidelines you treat these individuals as free lance ? It seems to be they should be employees? However assuming you are engaging these individuals correctly - then if that is what you have agreed - that he gets a percentage of the sales before VAT - and they are not VAT registered then they will get just that - if they are VAT registered they they would get their percentage plus VAT Butt I agree they have nothing to do with the VAT you have charged and collected - and are NOT entitled to a percentage of that at all (as you are collecting and paying this, in essence over to HMRC VAT) Thanks Sam
Customer: replied 2 years ago.
thanksI have spoken to somebody in the same line of work as me and he says something about not having to charge vat on the full amount because essentially the customer payment is part going to his company and part to a non vat registered person.I've never heard anything like that.The question of should they be an employee is a tricky one but usually we work with people who supply info to more than one service so we consider them as contractor supplying a service.
Hi Thanks for your response You advsie that you charge the client - and then you pay the free lancers - is that then not the case? As it would seem to me that without you as acting for the customer then the freelancer would not have the work as they do not liaise directly with the customer regarding fees and paymentOr are you an agent acting as intermediary? Thanks Sam
Customer: replied 2 years ago.
You're right, without me the freelancer wouldnt have the work.I guess that if I was acting as an agent that would be different then and that is the reasoning that some people in my business are using to charge less vat.I am selling a horse racing tipping service, so hundreds of people are paying me for 1 piece of information (each day) that the freelance supplies but they pay a monthly subscription. I get the customers and provide the infrastructure that the freelancers uses to distribute the information to the customers.So the freelancer inputs info into a website and management system that I provide, could I construe that as me being an agent for the freelancer and if I did would I only charge VAT on my part of the income?
Hi Yes you have got the gist of this - and I feel (based on what you say) that you engage them to work for you (whether this should be employed or self employed is not the immediate issue OR what you ask for!) You are not an agent - in fact without them you would have nothing to offer your customers, but the fact remains that you oversee the flow of information and you are acting correctly.But the way it arises is that the VAT registered freelancers should charge you VAT for the info they provide and those NOT VAT registered would not, then you pass this info on (or its available through its input onto the site) and you then charge your customers VAT - If you were an agent then you would be acting for the freelancers and passing their services to the customers - and this is NOT the case Let me know if I can assist further - but it would be appreciated if you could/would rate me for the level of service I have provided (or click accept) Thanks Sam
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Customer: replied 2 years ago.
Thanks Sam, I think I have a full understanding now