V3.221 Supplies by and through agents

Part V3 Supplies, acquisitions and imports

V3.221 Supplies by and through agents

Supplies made through an intermediary

V3.221 Supplies by and through agents

Nature of agency

Agency is the relationship which exists between two persons, one of whom expressly or impliedly consents that the other should represent him or act on his behalf, and the other of whom similarly consents to represent the former or so to act1. Whether or not an agency exists is a matter to be decided in accordance with the evidence2.

An essential element of agency is that both parties have consented to the relationship of principal and agent, even if they do not recognise that their agreement amounts to such a relationship3. Another common feature is the existence of a fiduciary arrangement with an obligation on the agent to account to his principal at some stage in the relationship4.

A case5 concerned a taxpayer who sold second-hand musical equipment. When an owner ('O') brought in an instrument, O was given a valuation for it. If willing to proceed, O then signed a written agreement appointing the taxpayer as O's agent to sell the instrument in return for a commission equal to the difference between the valuation and the selling price, if greater. HMRC assessed the taxpayer to VAT on the full selling price, whilst the taxpayer argued that the effect of the agreement was to limit its liability to VAT on the commission only. HMRC relied on several features of the transactions which it regarded as inconsistent with an agency relationship. These included:


    •     the fact that the

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