Finders fee and VAT taxable threshold

[-Chris-]

I have a query, it may seem obvious but:
If a worker, who wears my company uniform etc (not an employee, but a self employed worker) completes a job (which is organised by my company), takes all of the payment from the client and gives then a receipt in their own name, and then pays a 'finders fee' to my company - is it just the finders fee that counts towards my company 'Taxable turnover' (for VAT threshold purposes) or the whole amount that the client pays?
Many thanks.

 

[WaveJumper]

I assume he is invoicing them in his own company name for total amount and then you are invoicing him in you company name for the finders fee / lead ?

 

[-Chris-]

There's no invoicing, The job is arranged. The job is completed. The client pays the self employed worker. The self employed worker pays my company (finders fee)

 

[DWS]

There's no invoicing, The job is arranged. The job is completed. The client pays the self employed worker. The self employed worker pays my company (finders fee)

As always ‘who is supplying what to whom’
Is the client entering into a contract with your business or the S/E worker?
Who do they contact if something goes wrong or they are not satisfied with the work?

 

[WaveJumper]

To get paid someone must be supplying an invoice / receipt

 

[-Chris-]

As always ‘who is supplying what to whom’
Is the client entering into a contract with your business or the S/E worker?
Who do they contact if something goes wrong or they are not satisfied with the work?

Initially, the customer calls me to make the initial enquiry, I then organise for the SE worker to be there, to do the work. No contract.

If something goes wrong, the customer calls me and the SE worker goes there to rectify.

 

[-Chris-]

To get paid someone must be supplying an invoice / receipt

There's no invoices. Just a receipt if the customer asks for one. 99% of jobs charged to the customer are under £100.

 

[WaveJumper]

How do you reconcile your accounts

 

[-Chris-]

How do you reconcile your accounts

Can you clarify what you mean please?

 

[DWS]

Initially, the customer calls me to make the initial enquiry, I then organise for the SE worker to be there, to do the work. No contract.

If something goes wrong, the customer calls me and the SE worker goes there to rectify.

There is always a contract not necessarily written but still a contract.
Sounds like they believe your business is doing the work and if the worker is also wearing your uniform then this only reinforces that, in which case it would seem the total cost of the job is yours

 

[japancool]

And is the amount of the fee arranged by you? When you confirm the job, do you make it clear at any point that the person turning up is a self-employed individual not working for you, and liable for their own work?

 

[-Chris-]

There is always a contract not necessarily written but still a contract.
Sounds like they believe your business is doing the work and if the worker is also wearing your uniform then this only reinforces that, in which case it would seem the total cost of the job is yours

The customer pays the money to the SE worker.

 

[-Chris-]

And is the amount of the fee arranged by you? When you confirm the job, do you make it clear at any point that the person turning up is a self-employed individual not working for you, and liable for their own work?

Yes.

Yes.

 

[japancool]

If you've made it clear to the customer that's the case, then possibly you have a case to say that the only revenue you make is your finder's fee.

I'm not a lawyer, but it sounds to me like the customer may believe that the person is your representative, and you're basically subcontracting - in which case, your profit is the finder's fee, but your revenue is the amount the customer pays.

Let's suppose the person burns the customer's house down or drops something heavy on the customer's foot. Who would they take to court? If they took you to court (as the person who they've had contact with), how would you defend yourself and prove that you are not liable, but the self-employed person is?

An accountant or tax advisor may be the best person to clarify the position to you.

 

[DWS]

The customer pays the money to the SE worker.

It all depends on who the clients believe they are contracting to do the work,
You may be able to set this up so you are an agent in which case you would only account for your commission but you would need to make sure you have watertight contacts in place with the workers to show this, in case of a challenge from HMRC.
The problem I see is that why are the workers wearing your uniform if they are self employed and you are only getting a commission from the job, the wearing of a uniform implies that the job is yours and they are carrying out the work on your behalf.

 

[ecommerce84]

Do the workers carry out work exclusively for your company or can they bring in their own work which doesn’t incur the finders fee from you?

 

[WaveJumper]

Our think our OP is being rather disingenuous so leaving others to this thread

 

[-Chris-]

Do the workers carry out work exclusively for your company or can they bring in their own work which doesn’t incur the finders fee from you?

They also do separate work for others.

 

[-Chris-]

Our think our OP is being rather disingenuous so leaving others to this thread

It's not always wise to make incorrect assumptions.

 

[-Chris-]

If you've made it clear to the customer that's the case, then possibly you have a case to say that the only revenue you make is your finder's fee.

I'm not a lawyer, but it sounds to me like the customer may believe that the person is your representative, and you're basically subcontracting - in which case, your profit is the finder's fee, but your revenue is the amount the customer pays.

Let's suppose the person burns the customer's house down or drops something heavy on the customer's foot. Who would they take to court? If they took you to court (as the person who they've had contact with), how would you defend yourself and prove that you are not liable, but the self-employed person is?

An accountant or tax advisor may be the best person to clarify the position to you.

Yep, all makes sense.

 

[-Chris-]

It all depends on who the clients believe they are contracting to do the work,
You may be able to set this up so you are an agent in which case you would only account for your commission but you would need to make sure you have watertight contacts in place with the workers to show this, in case of a challenge from HMRC.
The problem I see is that why are the workers wearing your uniform if they are self employed and you are only getting a commission from the job, the wearing of a uniform implies that the job is yours and they are carrying out the work on your behalf.

Yep, good point.

 

[AlanJ1]

There's no invoicing, The job is arranged. The job is completed. The client pays the self employed worker. The self employed worker pays my company (finders fee)

So the self employed person invoices the customer. You invoice the self employed person for the "finders fee"

Where this get confusing is they are wearing your uniform, so they are representing your company. Are they self employed? Are they missrepresenting themselves to the customer

 

[-Chris-]

So the self employed person invoices the customer. You invoice the self employed person for the "finders fee"

Where this get confusing is they are wearing your uniform, so they are representing your company. Are they self employed? Are they missrepresenting themselves to the customer

Thanks Alan. I did see this relating to the uniform:

Can your subbies wear your branded uniform? | Construction Insider

Have you heard the Chinese whisper of "your subcontractors can’t wear uniforms with your logo on"? Well today, thanks to the team at Hardhats, we are seeing that is true or a myth of the industry!

www.saintfinancialgroup.co.uk

 

[AlanJ1]

Thanks Alan. I did see this relating to the uniform:
[URL unfurl="true"

I guess it makes sense, are they subbies or only doing work for you?

 

[-Chris-]

I guess it makes sense, are they subbies or only doing work for you?

They do work for others as well.

 

[DWS]

Thanks Alan. I did see this relating to the uniform:

Can your subbies wear your branded uniform? | Construction Insider

Have you heard the Chinese whisper of "your subcontractors can’t wear uniforms with your logo on"? Well today, thanks to the team at Hardhats, we are seeing that is true or a myth of the industry!

www.saintfinancialgroup.co.uk

The problem with this article is that if they are Sub Contractors then that makes you the Contractor in which case the whole job is yours as they are subcontracting from you

 

[-Chris-]

The problem with this article is that if they are Sub Contractors then that makes you the Contractor in which case the whole job is yours as they are subcontracting from you

Thank you. At the moment, the self employed worker just pays us a small commission for each job we put to them.

 

[DWS]

Thank you. At the moment, the self employed worker just pays us a small commission for each job we put to them.

It’s not me you need to convince it’s HMRC, especially if it means the difference between being VAT registered or not.
As I said upthread it is possible to set yourself up as an agent and only declare the commission but you need to make sure you have enough supporting evidence in place to back this up.
Why is it important for them to wear your uniform?

 

[-Chris-]

It’s not me you need to convince it’s HMRC, especially if it means the difference between being VAT registered or not.
As I said upthread it is possible to set yourself up as an agent and only declare the commission but you need to make sure you have enough supporting evidence in place to back this up.
Why is it important for them to wear your uniform?

I would say it wasn't critical for them to wear the uniform, it just helps to spread the word to others in case other people see it.

 

[IanSuth]

Yep, good point.

there is some precedent on this

From memory when i started in recruitment it was normal for VAT exempt clients like charities to have agencies do a form of invoicing where just the agency "fee" had VAT added and the pay that was channeled to the worker + NI etc was on a separate non VATed invoice - this was a long standing practice condoned by HMRC

At some point (i thin early 200's but maybe very late 90's) this changes as HMRC issued new guidance saying it all had to be sent a single VATed invoice - there was a lot of fuss about it at the time from large charities for whom it made a big difference (especially private schools with charitable status employing agency teachers as they can't claim the VAT back in any way)

So i guess HMRC have thought this through and would expect the entire value of the job to be VATable and therefore count towards your threshold

 

[Paul Kelly ICHYB]

In its basic form, the answer is your turnover is the finders fee, so, you pass the job on with an invoice for said fee.

As mentioned, the bigger issues are:

• Does the client think you are carrying out the work or a third party - what do you say on your marketing or booking confirmation sent to the client?
• The person doing the job is wearing your uniform, which gives the impression that they are working for you - that is a very bad impression to give to HMRC.
• You mentioned that there is 'no invoicing' - how do you account for things? How does the contractor account?

 

[IanSuth]

this may cover your question

Is VAT Owed for Temporary Workers? | The VAT People

When is VAT owed on the supply of temporary workers? Learn more from The VAT People, in this analysis of the legal precedents set by recent tribunal verdicts.

www.thevatpeople.co.uk

However be aware if you start saying you are just an "introducer" you are self declaring yourself as an employment business and therefore you would have to follow all those laws (like who you can charge and record keeping etc) so you may want to look at this holistically

The Conduct of Employment Agencies and Employment Businesses Regulations 2003

These Regulations revoke the Conduct of Employment Agencies and Employment Businesses Regulations 1976, the Employment Agencies Act 1973 (Charging Fees to Workers) Regulations 1976 and the Employment Agencies Act 1973 (Charging Fees to Au Pairs) Regulations 1981.

www.legislation.gov.uk

 

[-Chris-]

I would say it wasn't critical for them to wear the uniform, it just helps to spread the word to others in case other people see it.

It’s not me you need to convince it’s HMRC, especially if it means the difference between being VAT registered or not.
As I said upthread it is possible to set yourself up as an agent and only declare the commission but you need to make sure you have enough supporting evidence in place to back this up.
Why is it important for them to wear your uniform?

there is some precedent on this

From memory when i started in recruitment it was normal for VAT exempt clients like charities to have agencies do a form of invoicing where just the agency "fee" had VAT added and the pay that was channeled to the worker + NI etc was on a separate non VATed invoice - this was a long standing practice condoned by HMRC

At some point (i thin early 200's but maybe very late 90's) this changes as HMRC issued new guidance saying it all had to be sent a single VATed invoice - there was a lot of fuss about it at the time from large charities for whom it made a big difference (especially private schools with charitable status employing agency teachers as they can't claim the VAT back in any way)

So i guess HMRC have thought this through and would expect the entire value of the job to be VATable and therefore count towards your threshold

Okay, will bear that in mind.

 

[-Chris-]

In its basic form, the answer is your turnover is the finders fee, so, you pass the job on with an invoice for said fee.

As mentioned, the bigger issues are:

• Does the client think you are carrying out the work or a third party - what do you say on your marketing or booking confirmation sent to the client?
• The person doing the job is wearing your uniform, which gives the impression that they are working for you - that is a very bad impression to give to HMRC.
• You mentioned that there is 'no invoicing' - how do you account for things? How does the contractor account?

It's just verbally over the phone.

As mentioned, it's not critical that they wear the uniform.

Has anyone come across an example contract that would cover me on this?