By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Agents
  • What is an agent?
  • VAT treatment of agency arrangements
  • Registration requirements
  • Invoicing
  • Disbursements
  • VAT representatives or agents acting for overseas principals
  • Debt collection agencies
  • Employment bureaux
  • Auctioneers
  • Key considerations

This guidance note provides an overview of the VAT rules relating to supplies made by businesses who are acting as an agent of another party.

What is an agent?

The term agent is not defined in legislation but an agent is regarded as someone who acts for, or represents, the principal in arranging a supply of goods and services. The agent will arrange the supply to or by the principal in the transaction. The principal will still be required to account for any VAT due on the supply made and it cannot avoid payment of VAT by engaging the services of an agent.

An agency arrangement will exist if both the agent and the principal are in agreement and the agent agrees to act on behalf of the principal in relation to the specific transaction involved. The agreement between the parties can be oral, written or inferred from the relationship that exists between the parties.

According to Notice 700, para 22.2   the following conditions must be satisfied before an agency arrangement will exist:

  • It must always be clearly established between the agent and principal, and acceptable to HMRC, that the agent is arranging transactions for the principal, rather than trading on his own account

  • The agent must never be the owner of the goods or use any of the services bought or sold for the principal

  • The agent must not alter the nature or value of any of the supplies made between the principal and third parties.

The issue of whether an agency arrangement exists was the subject of HMRC v Secret Hotels2 Ltd  . This case concerned the liability to VAT of Secret Hotels, which arranged holiday

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