are these transactions considered B/Turnover

[etrades]

Hello,

First of all Thankyou to all of you , who had responded and help me clear my doubts on every occasions i have needed help.

At the moment am stuck relating to business Turnover.

I get orders from a Big company in my industry to buy stock for them
we have a letter from them stating we buy stock for them on commission basis.
but the purchase payments are made by us n then the company re reimburse s payment + commission to us

Our company is newly formed , and have accepted 2 such orders which now totals to £50,000 . we have a new order which will be around £33 k

They claim that as we are buying stock for them as per the contract , this 33k is not be considered as turn over, as the original receipts are handed over to them as well so they can claim VAT back etc

Can someone throw some light on it , if this is correct

regards

 

[akirk]

so you are buying something...
then they are paying you the cost + profit...

sounds like a normal business transaction no accountancy expert here, but sounds like turnover - inputs and outputs

Alasdair

 

[robindunne]

What details are on the invoice? Yours or theirs?

 

[etrades]

Thankyou for your response,

There are no names on the purchase invoice. it could be items like from High street retailer. we find best possible deals for them .

Like say if i was to buy playstation from argos and sell them along with receipts and take a little bit commission(cant think of another example)

then they would re-reimburse cost + ill invoice them for commission

regards

 

[Mpg]

There's me thinking Turnover was how much money your business has..erm Turned over. £1 in, £1 out your business has turned over £1.

I will check back in a while incase I have just made a big boo boo

 

[David Griffiths]

They are turnover if you purchase them, become the owner and then sell them on.

In the current case, I believe that they are being purchased as agents for the bigger company, in which case they are not part of turnover

 

[etrades]

hello,

david, thanks a lot for your input . , at the moment we have got a letter from the director and accountants department from thier company , that this stock is being purchased for them by us on commission basis.

do we need to keep anything apart from that letter as a proof for hmrc , to confirm that this doesnt get counted as a business t/o for us or else we will be over VAT threashold and clearly we arent buying the goods in our name. just shifting them on commission basis

thanks

 

[akirk]

If goods are being bought on a non-invoice basis (e.g. walking into Argos and buying an item) then would HMRC not argue that in the relationship between said store and yourself you are considered to be the purchaser and therefore the owner...?

Would you not need to ensure in some form that the original seller (Argos et al) understands the end purchaser as the owner?

So if you take your customer's cash into Argos - then fine, it is acting as an agent, but if you go in and buy it with your company cheque / credit card, then you become the owner whatever your intention?

interested to know...

Alasdair

 

[etrades]

If goods are being bought on a non-invoice basis (e.g. walking into Argos and buying an item) then would HMRC not argue that in the relationship between said store and yourself you are considered to be the purchaser and therefore the owner...?

Would you not need to ensure in some form that the original seller (Argos et al) understands the end purchaser as the owner?

So if you take your customer's cash into Argos - then fine, it is acting as an agent, but if you go in and buy it with your company cheque / credit card, then you become the owner whatever your intention?

interested to know...

Alasdair

hello,

thanks for your input ! the goods are purchased in cash and its not just a day purchase it takes us atleast a week and numerous small cash purchases depending on stock availibility


regards

 

[etrades]

hello,

thanks for your input ! the goods are purchased in cash and its not just a day purchase it takes us atleast a week and numerous small cash purchases depending on stock availibility


regards

Can someone suggest if we are doing it in right way , or do we need to have something special in writing from the company.

usually this is quite a common phenomenon when a individual does this, however this time its us acting as a pvt company doing it so we are a bit confused

 

[etrades]

anyone can add anything to it ! :|

 

[Strontium Dog]

Unless I am mistaken, this Q is all about VAT. The OP is not VAT registered, but said Big Company is, and wishes to reclaim the VAT.

As David Griffiths said, I think it all depends upon whether OP is acting as agent for the Big Company.

 

[etrades]

Hello,

we arent sure if they wil reclaim VAT or to sell to end user. However our query atm is mainly that it should get counted as our T/o . so what should we do , is the letter enough ?

 

[David Richards]

Hello,

we arent sure if they wil reclaim VAT or to sell to end user. However our query atm is mainly that it should get counted as our T/o . so what should we do , is the letter enough ?

A good place to start is VAT Notice 700 section 22 - which is all about supplies made by or through agents.

If you are in doubt as to the terms of your contract with the 'big company', you might want to speak to a solicitor.

 

[mr. mischief]

You need to take care here - especially if you are not VAT registered - because if you are deemed to be acting as principal and not as agent then you're over the £70k limit and need to register.

There have been lots of cases on this down the years. In general an agent arranges the sale of something, whereas if you are acting as principal you buy the item and then re-sell it.

On the basis of your post I'd argue that we have an agency situation here. You have correctly stated in your post the fundamental basis of an agency supply: that there are two supplies!

Supply 1 is the good or services being dealt in.
Supply 2 is the supply of an agency service by you for agreed commission

It is best practice to make clear what you're doing (or think you are doing) on the invoice. A stockbroker is a good example of this.

Their standard terms on the face of the contract note are along the lines of "We have acted as agent unless otherwise stated".

Where they have sold the shares off their own book - less common now than 20 years ago - the invoice will state "sold as principal".

So if I were you I'd be putting "Sold as Agent" on my invoices at the very least.

 

[etrades]

A special thanks to everyone who contributed to this thread ! Really appreciate everyones input

We have a letter from the company on their letter head, which does include the following

That my company is performing a role of "purchasing agent" and will be re-reimbursed "purchase expenses" and Paid Agreed Commission for work performed


we hope this is sufficient, Any other suggestions always welcomed

 

[etrades]

Just wanted to confirm if those wordings are sufficient !

Kind regards

 

[Tom McClelland]

Excellent advice is available here, about matters of general principle.

However, if you're looking for cast-iron assurance about your exact VAT situation in a complex legal area I don't think it is sensible to seek it from random strangers met on an internet chat board. It doesn't matter how well-intentioned or knowledgeable they are; they don't have the full facts about your business right in front of them. For specific assurance about your particular situation you should seek paid-for professional advice (conceivably even from a member of this forum) that would involve a professional advisor seeing the contracts in full, seeing sample sales and purchase documents, and talking to you about your actual business process.

 

[Bob]

Can someone suggest if we are doing it in right way , or do we need to have something special in writing from the company.

usually this is quite a common phenomenon when a individual does this, however this time its us acting as a pvt company doing it so we are a bit confused

I may be wrong, but I think that you could have some significant problems here if you are carrying out transactions as large as £33K in CASH. Have you thought about money laundering? Do you have an accountant? If so, I would definitely make him aware of what you are doing and ensure that he is satisfied with the records and the way in which business is transacted.

Definitelya possibility of an MLRO (perhaps at the Bank) making a report of cash transactions of this magnitude