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VAT on ticket sales

Discussion in 'Accounts & Finance' started by benseb, Apr 2, 2006.

  1. benseb

    benseb UKBF Regular Free Member

    Posts: 7 Likes: 0

    I've got a query about ticket sales - we act as agents for a number of companies and sell tickets on their behalf. We charge the exact same amount as we purchase them for, plus add a 10% comission. The customer is aware of this and knows that they are getting tickets from our supplier.

    As such are we allowed to class the actual tickets as a disbursement so we dont pay tax on it (and cant claim tax on it)

    for example (normal way without disbursement)

    Tickets Net: £85.10
    Vat:: £14.90
    We pay: £100

    Charge to customer
    Tickets + 10% Service Charge (inc vat):

    Net: £93.62
    Vat: £16.90
    They pay: £110

    We can claim back £14.90 input tax but pay £16.90 (so we 'lose' £2 per transaction on a £10 comission- not ideal!)

    However if we could treat the ticket as a disbursement, then we would claim no input vat back but pay:

    £1.75 (vat on £10)

    A lot of our suppliers are also not vat registered, so this way would be preferential (otherwise we would pay £16.90 on a £10 comission!!!)

    Does that sound correct???
  2. Alpha

    Alpha UKBF Regular Full Member

    Posts: 4,130 Likes: 518
    I'm afraid the key to this is the fact that you 'sell tickets'.

    As such the supply you make is for the sale of the ticket and hence the whole lot will be chargeable to VAT.

  3. benseb

    benseb UKBF Regular Free Member

    Posts: 7 Likes: 0

    If this is the case then how can any agency like us make a profit when vat registered? I know for a fact that ticketmaster, etc all charge a 10% booking fee (inc vat) - so if my sums are correct, they will make a loss!

  4. Alpha

    Alpha UKBF Regular Full Member

    Posts: 4,130 Likes: 518
    Not sure about your logic either.

    If you acquire a ticket for £100 inc vat and sell it for no profit you will charge the customer £100. VAT paid over net will be zero.

    This leaves your commission which is controlled by you.

    If you charge 10% commission it is £10 plus vat of £1.75.

    If the ticket is treated as a disbursement it will still cost you £100 for the ticket, if you put 10% commission on it will then be £10 plus vat.
  5. benseb

    benseb UKBF Regular Free Member

    Posts: 7 Likes: 0
    The thing that confuses me, is:

    we sell ticket for £110
    say the supplier to us is not vat registered

    We pay £15.71 vat out of that - ouch, a £5.71 loss!

    However we are in the same boat as every other ticket agency who also deal with non-vat reg clients! There must be a loophole here somewhere, I'm sure its something to do with 'disclosed agents' but the wording is unclear. Another email to the vat office by the looks of it!

    Thanks for your help
  6. Astaroth

    Astaroth UKBF Regular Free Member

    Posts: 4,074 Likes: 280
    Not sure about your sums but I make it that for each ticket sale there is £8.52 profit per ticket post VAT

    £110 in, minus £16.38 VAT payable, minus £100 originally paid for the ticket plus the £14.90 of recoverable VAT = £8.52

    I would also imagine that most booking agents dont pay the face value of the ticket anyway - I know in one of my student jobs in an indep CD store we used to buy our tickets in often at between 50-75% of their face value and then sell them at face value plus the 10% handling charge.
  7. Alpha

    Alpha UKBF Regular Full Member

    Posts: 4,130 Likes: 518
    If the selling price is fixed at £110 and

    1) If the ticket supplier is not vat registered he would be selling the ticket for £85.11* and you would make (£93.62 - £85.11 ) £8.51 margin per ticket.

    2) If ticket supplier is vat registered you would buy for £85.11 and sell for £93.62 i.e the same profit margin. The vat paid over would be (£16.38 - £14.89) £1.49.

    * If the seller was not vat registered and wanted you to sell at a fixed price of £110 then you would tell them were to go :D
  8. Alpha

    Alpha UKBF Regular Full Member

    Posts: 4,130 Likes: 518
    If you were able to treat the ticket as a disbursement you would simply make a profit margin of £10 - 17.5% vat = £8.51 which oddly enough is the same as the scenario that you have now :D
  9. benseb

    benseb UKBF Regular Free Member

    Posts: 7 Likes: 0
    yes I agree there - the big difference is whether our third party (the principle, the guy with the event) is vat registered.

    I know for a fact that ticket agencies will arrange sales of tickets for £100 + 10%, even if the person they are selling on behalf of is not vat registered.

    they dont invoice them for £85.10 they invoice them for £100 (full face value) - ive sold tickets with them before when i was not vat registered. so they must have a way of 'ignoring' that £100. And from what I can see on the vat site you are allowed to do this, because:

    You acted for the customer when paying the third party:

    the customer actually received and used the goods or services provided by the third

    the customer was directly responsible for paying the third party;

    you were authorised to make the payment on your customer behalf;

    the customer understood that the goods or services were provided by a third party;

    the amounts disbursed must be separately itemised when invoicing the client;

    only the exact amount disbursed is recovered from the customer; and,

    the goods or services must be clearly additional to your supplies to the customer (booking fees)