Commission Payments

[loachey]

Hi

My client sends alot of printing work to one source and for this they get a commission payment. They have asked me to raise an invoice for an amount that equates to January's commission.

I have never come across this before. I deal with other clients and they have commission payments from various sources and I receive a commission statement stating how much will be paid into the bank and when. Is there a right/wrong way to do this? I wouldn't have thought I would have to raise an invoice but then it is income so why not? However, am I right in assuming that all commission payments are zero-rated for VAT?

Any info on this would be greatly appreciated.

Thanks, Tara

 

[sarah844]

but isn't commission an income to the business thus its taxable in any sense?

 

[loachey]

Yes and I am not trying to say it isn't income and not pay tax on it.

What I am trying to establish is what paper trail is needed - ie whether I need to be raising sales invoices for the amounts on a monthly basis (for example how do I know how much the commission is without speaking to the supplier first?)

Or whether it is acceptable for the supplier to send me something like a commission statement stating how much they are going to pay me and when and then they pay it and I post it as a income?

I have differing views from different clients so I thought I would ask a few experts and see what they say?!

Tara

 

[bwglaw]

From a legal perspective, I would encourage in submitting your invoice on a monthly basis as this will be evidence of a contract between you as well as a clear entitlement to statutory interest for late payment.

Is the rate of commission not agreed in advance with the supplier?

Accountants on here may offer a different angle to this.

 

[David Griffiths]

However, am I right in assuming that all commission payments are zero-rated for VAT?

Nope!


The great majority of commission payments are standard rated and I can't think of any that are zero rated unless the supply is outside the UK.

Some commissions for arranging financial products are exempt, but even then some are standard rated

Commissions for arranging print services are standard rated (even if the print work itself is zero - unless one of our VAT experts disagrees)

Being asked to raise an invoice for commissions received is certainly not unusual

 

[loachey]

Thanks for the responses. Invoices have now been raised and sent off for payment.

Tara