The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note examines the topic of agents (agency) and principals for VAT purposes.
For an overview of supply and consideration generally, see the Supply and consideration ― overview guidance note.
For in depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.221.
Neither the term agent nor the term principal is not in the VAT legislation. However, HMRC will broadly use the term agent to describe a person who acts for or acts for someone else with the consent of both parties. That ‘someone else’ is the principal. An agent arranges supplies of goods or services by, or to, its principal.
It is worth noting that a person who describes themselves as an agent may nonetheless be acting as a principal within the VAT meaning of the term.
According to HMRC, to act as an agent, a business must have agreed with its principal to act on their behalf in relation to the particular transaction concerned (this may be a written or oral agreement, albeit a written agreement is often advisable). Whatever form the relationship takes, HMRC expects the following conditions to be met:
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
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