Please help - Groupon & VAT

[pinkdon]

Hi,

I'm really hoping someone can help. We are a small restaurant, VAT registered, and have just ran a Groupon promotion. I'm unsure how I show this in our Sage accounts. We are invoiced once a month from Groupon which show's the value of redeemed vouchers, their commision and VAT. As I understand it, we must pay treat the voucher as cash sales and pay Vat on the full face value of the voucher. We can then reclaim the Vat charged by Grouponon. Is this correct and if so how do I show this in Sage? Any advice would be hugely appreciated.

 

[Scalloway]

Do you get back the sales less commission and VAT? If so when the receipt hits your bank do a bank recepit for the full amount of sales and appropriate VAT using Code T1. Then do a payment from bank for the commission and appropriate VAT using Code T1. I don't think Sage can cope with debits and credits on the same receipt or payment.

 

[pinkdon]

Yes, the invoice shows the total value of redeemed vouchers, the net value of the invoice (their 50% plus vat their commision) and the remainder which is paid directly to our bank. Should we just be paying the vat as shown on the invoice of the price we sold the voucher at or the full value? For example we sold £35 worth of food for £12.

 

[Scalloway]

I can't quite get those figures to work but my suggestion based on £35 of sales is

Dr Commission...17.50
Dr VAT..............3.50
Dr Bank............14.00
Cr Sales...................29.17
Cr VAT......................5.83

 

[pinkdon]

Sorry, I'm not too great on explaining this! The customer buys the voucher for £12 but receives food to the value of £35. So the £35 voucher goes throught the till as sales. As only £12 was actually paid, they take 50% plus vat (£7.20) leaving us with £4.80 per voucher. Would I be right in thinking we pay vat on the £12 opposed to the £35?

 

[Scalloway]

Then it will be

Dr Commission....6.00
Dr VAT..............1.20
Dr Bank.............4.80
Cr Sales...................10.00
Cr VAT......................2.00

 

[pinkdon]

Thanks so much for your help, it really had me confused.

 

[pinkdon]

Just to make others aware, we had a visit from the vat man who has helpfully declared that we should be paying vat on the full voucher value - £34.95 even though the voucher is sold for £12 and we only actually receive £4.80. Beware!

 

[Spongebob]

Surely it would be better not to put Groupon sales through the till at all, instead accounting for them in a simple book.

Then, when the promotion is over, put the total amount received from Groupon through your accounts as a sale and pay VAT on this. You are, after all, selling a meal for £4.80. Why should you pay VAT on anything other than the amount you are selling it for?

The fact that you are making a loss on this sale is irrelevant. There is nothing unlawful about selling a product at a loss.

It does make me wonder what the attraction of these Groupon promotions is to the retailer. As a consumer I am beginning to suspect that any retailer offering a Groupon deal is on the verge of insolvency and embarking on a last ditch effort to boost custom at any cost...

 

[goz83]

Just to make others aware, we had a visit from the vat man who has helpfully declared that we should be paying vat on the full voucher value - £34.95 even though the voucher is sold for £12 and we only actually receive £4.80. Beware!

I think the Tax man might be a little confused there. You sold the deal for £6 and groupon added £6 for promoting the deal. As you only receive £6, this is what you pay VAT on. Groupon pay VAT on their half too.

I had a shock last night when I discovered that groupon have calculated everything incorrectly for a deal i did recently. To cut a long story short, they have charged VAT on the VAT inclusive price, which throws everything off. They simply added 21% to the 50% of my fee to get the VAT rate, which is course incorrect. They should have divided the fee by 121 (21 being the vat rate) and then multiplied the result by 100 to give the ex vat rate. Take the ex vat rate away from the 50% fee to give the actual vat rate. They have under paid me by hundreds and I can't get an answer from them all morning, or afternoon. I have a vat return to finish right now, so i'm thinking of just letting the tax man know what has happened, which might cause big problems, because I have a feeling they have made this mistake possibly every other contract. Why? Because of the 2 payments I have received, both have the mistake, in different VAT return periods. You should check yours too. By the way, you can write their 50% off as advertising expenses.

 

[Scalloway]

I have found the rules on credit vouchers which are here

http://customs.hmrc.gov.uk/channels...HMCE_CL_001446&propertyType=document#P20_2235

the redeemer must account for VAT on the full face value of the voucher at the time the voucher is redeemed.

 

[Anna Chandley]

Pinkdon

I agree with goz83 and think HMRC have got this wrong and you should challenge their decision. This is not an area of VAT that I have had particular experience with the quote below is from the HMRC website (revelant page is here )


"When a customer redeems a face value voucher, the transaction is treated as though the face value voucher was cash, and VAT is due on the full value of the transaction. If you can show the voucher had been sold at a discounted amount, VAT is due on the discounted value, rather than the face value of the voucher"

You van show that the voucher was sold at a discounted price so should only charge VAT on the £12 that it was sold for and then reclaim the VAT charged on the Groupon commission.

 

[pinkdon]

Thanks to everyone who took the time to reply. We are definately appealing this decision, it just doesn't make sense. Will let you know the outcome.

 

[hopthink]

Just to make others aware, we had a visit from the vat man who has helpfully declared that we should be paying vat on the full voucher value - £34.95 even though the voucher is sold for £12 and we only actually receive £4.80. Beware!

We are newly launched company, we are here to study how to promote the company.

 

[Claire Bradbury]

Thanks to everyone who took the time to reply. We are definately appealing this decision, it just doesn't make sense. Will let you know the outcome.

Hi, I am struggling with the same problem as discussed here and no one seems to know the answer, I have rung HMRC and Sage. Did you get a reply to your appeal?
Thanks
Claire

 

[Claire Bradbury]

Thanks to everyone who took the time to reply. We are definately appealing this decision, it just doesn't make sense. Will let you know the outcome.

I think the Tax man might be a little confused there. You sold the deal for £6 and groupon added £6 for promoting the deal. As you only receive £6, this is what you pay VAT on. Groupon pay VAT on their half too.

I had a shock last night when I discovered that groupon have calculated everything incorrectly for a deal i did recently. To cut a long story short, they have charged VAT on the VAT inclusive price, which throws everything off. They simply added 21% to the 50% of my fee to get the VAT rate, which is course incorrect. They should have divided the fee by 121 (21 being the vat rate) and then multiplied the result by 100 to give the ex vat rate. Take the ex vat rate away from the 50% fee to give the actual vat rate. They have under paid me by hundreds and I can't get an answer from them all morning, or afternoon. I have a vat return to finish right now, so i'm thinking of just letting the tax man know what has happened, which might cause big problems, because I have a feeling they have made this mistake possibly every other contract. Why? Because of the 2 payments I have received, both have the mistake, in different VAT return periods. You should check yours too. By the way, you can write their 50% off as advertising expenses.

Hi did Groupon ever reply to you? They are still doing it this way...

 

[goz83]

I have had a few responses from so-called professionals in the area and they varied wildly. In the end, i applied my own logic and I hope it pays off. If Groupon sell your service for £50, VAT is included for the customer already. I considered their product as a marketing service and applied the following:

Note: The normal price of your product/service should not be considered, save for the example where a loss is made in the deal price.

1) Groupon charge customer the full voucher price of say £50, VAT of 21% included.
2) Groupon charge 50% PLUS VAT (25+5.25=30.25) for their service, leaving the client (you) with £19.75, of which you pay income/corporation tax on. You don't pay VAT, as you have not collected VAT.
3) Claim the VAT that Groupon charged (£5.25) for their marketing charges. This amount does not form part of your taxable profits and will only be applicable to you VAT payable/repayable amounts.

This was the most straight forward way and I believe it is the way it is intended to be done. Treat Groupon as a Marketing expense, where you receive your already VAT paid profits from. Otherwise, the same service attracts VAT twice. It is also the only way you actually get 50% from Groupon and in my opinion, is better than receiving 50% upfront and having to pay tax on the 50% rather than circa 40%.

Hope this helps everyone.

 

[Jaydee]

1) Groupon charge customer the full voucher price of say £50, VAT of 21% included.
2) Groupon charge 50% PLUS VAT (25+5.25=30.25) for their service, leaving the client (you) with £19.75, of which you pay income/corporation tax on. You don't pay VAT, as you have not collected VAT.
3) Claim the VAT that Groupon charged (£5.25) for their marketing charges. This amount does not form part of your taxable profits and will only be applicable to you VAT payable/repayable amounts.

Why are they charging 21% - is it not UK VAT then?

 

[goz83]

Why are they charging 21% - is it not UK VAT then?

Apologies. 21% is the Irish VAT rate (i live in Ireland). I used "£" to try not to confuse people . I am sre people will still understand what I mean.

 

[pinkdon]

Just a quick update, we have still not heard anything but are putting it through the accounts at the price it was sold for (£12). Will let you know once we hear back. I would be interested to hear how other companies are putting it through their accounts if anyone has ideas? Thanks

 

[Deleted member 131813]

Note: The normal price of your product/service should not be considered, save for the example where a loss is made in the deal price.

1) Groupon charge customer the full voucher price of say £50, VAT of 21% included.
2) Groupon charge 50% PLUS VAT (25+5.25=30.25) for their service, leaving the client (you) with £19.75, of which you pay income/corporation tax on. You don't pay VAT, as you have not collected VAT.
3) Claim the VAT that Groupon charged (£5.25) for their marketing charges. This amount does not form part of your taxable profits and will only be applicable to you VAT payable/repayable amounts.

Hi,

I am far from an expert in this area but it doesn't seem that anyone is actually paying HMRC any VAT for the actual product being sold using this model.

I can't imagine Groupon are paying HMRC 20% of the £50 voucher value and the retailer isn't paying HMRC anything, only claiming the VAT on Groupon's fee.

Surely someone has to pay HMRC 20% of either the amount the customer paid (in the example about it's £50) or the full value of the voucher (£100 in the example above).

I think it is likely, you will have to pay VAT on the amount that the customer paid for the voucher (£50 in the above example) and pay that to HMRC.


Phillip

 

[Deleted member 131813]

Following my previous note I spoke with an ex-collegue who managed Groupon with my previous employer. I believe you will be invoiced on the following basis:

Groupon voucher value £20
Customer paid value £10
VAT on paid value 20% of £10 = £2
Groupon charge 50% of paid value = £5
Invoice from Groupon VAT + fee = £2 + £5 = £7

So in this example, your cost of goods/services plus cost to serve had better be £3 or less ;-)

 

[Tom McClelland]

I can't imagine Groupon are paying HMRC 20% of the £50 voucher value and the retailer isn't paying HMRC anything, only claiming the VAT on Groupon's fee.

Why on earth wouldn't Groupon have to charge VAT at normal rate when it sells the vouchers, on the amount charged for the vouchers (not their face value, of course, that is irrelevant because the vouchers enforce a discount on the ultimate supplier)? How would Groupon avoid that other than fraudulently?

 

[Spongebob]

The more one looks at the Groupon model the more it becomes obvious that it is very attractive for the end customer, very attractive for Groupon, and a bloody awful proposition for the retailer...

 

[Deleted member 131813]

Why on earth wouldn't Groupon have to charge VAT at normal rate when it sells the vouchers, on the amount charged for the vouchers (not their face value, of course, that is irrelevant because the vouchers enforce a discount on the ultimate supplier)? How would Groupon avoid that other than fraudulently?

I agree that someone has to but in the example the person gave, Groupon were invoicing VAT for their fee (e.g. 50% of the customer real cost) and not VAT on the customer real cost. If you see my follow up post, you will see that I believe that they invoice their fee plus the VAT on what the customer paid. However, it's a bit of a mess and from what i understand, the Groupon staff don't fully understand.

 

[Dahu371]

I was looking for advice on this very issue and came across this thread. I thought the answer should be straightforward but it appears not!

The way I have done this is to account for sales VAT on the price paid by the customer for the voucher. I don't think that Groupon accounts for VAT on sales and therefore we have to.

Groupon's terms and conditions state:

5.13 Value Added Tax: Currently the sale of Vouchers by us is not subject to VAT. If UK VAT law changes we reserve the right to charge you VAT in addition to the price for the Vouchers.

 

[Spongebob]

Thankfully I am not VAT registered, and even more thankfully I have not yet had to resort to using Groupon to drum up business.

However, if I had to do both of these, I think I would simply enter the monies received from Groupon as sales receipts, and declare VAT on that amount.

The amount paid by the customer to Groupon - or the face value of the vouchers - is irrelevent to me from a bookkeeping point of view. All that counts is the money I receive.

When a customer redeemed a voucher I would simply record the details in a manual ledger for my own reference. I would certainly not put anything through the till as this would only confuse matters.

Then, when money arrives from Groupon, I would enter the details as a sales receipt and declare the VAT componant.

What can possibly be wrong with doing it like this?

 

[Dahu371]

However, if I had to do both of these, I think I would simply enter the monies received from Groupon as sales receipts, and declare VAT on that amount.

...

Then, when money arrives from Groupon, I would enter the details as a sales receipt and declare the VAT componant.

What can possibly be wrong with doing it like this?

The problem with this is that you have a VAT invoice from Groupon stating the VAT paid on their commission. If you only paid to HMRC sales VAT on the actual cash you'd received, it's more than likely this would be less than the VAT you're reclaiming.

In my business we do a partial exemption VAT calculation, so it's very important to get the sales and purchase VAT elements correct.

 

[Deleted member 131813]

I have now spent quite a bit of time working on a deal with Groupon over the last few weeks and over the last 2 years ran about 10 deals with them at my previous employer.

This is what I confirmed/agreed with Groupon last week:

Customer paid amount = £y
-This is usually a 50% or greater discount of the 'value' it represents
-Although they now say they will only accept 60% discount

Groupon claim that they pay HM Revenue VAT on what the customer pays i.e. £y
-In the UK they pay HM Revenue 20% of £y

Groupon charge you their % fee on £y
-It's important to note that their % fee is on the full inc. VAT amount paid by the customer

Groupon will keep the revenue from customers who do not redeem the voucher with you
-Unless you can negotiate otherwise

When Groupon UK pay you they will pay
£y - (VAT of £y) - (Agreed % fee of £y inc VAT)

In my experience you will receive between 30% and 45% of what the customer actually paid.
-This will therefore be about 17% to 23% of your normal inc. VAT retail price

Therefore it's very hard to break even let alone make a profit on Groupon unless:
-You have incredibly low % cost prices (I'd guess you need to be at 10% cost with virtually no cost to serve)
-You believe a large % of customers will repeat purchase at the normal price
-You have significant other products available and believe a large % of customers will up-sell using the voucher

I have quite a bit of experience with these guys, private message me if you would like some help on the economics or in working out a better deal with them.

 

[Dahu371]

Hmmm curiouser and curiouser.

When I read that Groupon "claim that they pay HM Revenue VAT on what the customer pays", I called them straight away. To be honest they weren't that clued up on VAT but the lady did check with someone and confirmed that they do not charge VAT on the sale of the vouchers (and this is what is stated on their website too).

They were a bit confused by the terms sales VAT and input VAT, and started by telling me that they do collect VAT, but what they meant was just on the commission invoice they send to me. Did you get anything in writing, or is it possible they made a mistake in telling you what they did?

 

[dance621]

I went into this with my accountant in some detail today. Based on what they found out (and this included a couple of calls to groupon), it works something like this. Excuse me for my terminology.

Groupon sell a £50 voucher (could be discounted from 1Million. Doesnt effect VAT)

Agreement states 50% commission (their fee), so £25. They call this "Net total Fee Value"

They add £5 VAT onto their commission so their fee increases to £30 (at 20% VAT).

So what they call the "Gross Value of Invoice" is £30.

This means the the retailer gets paid £20.

The retailer can account in two different ways and it makes no difference which way.

1) They become responsible for the VAT on the full £50 of the voucher (ie £8.33) and then reclaim the £5 VAT added by Groupon. So net result is 8.33-5= retailer owed HMRC £3.33. Meaning after settling up with HMRC the £20 groupon gave retailer goes down to £16.67. This is 33% of the £50 voucher price.

2) The other way of calculating it is to ignore the groupon VAT invoices sent to the retailer. Just ignore everything they send you. If you just treat the money groupon send you as income then you have to take VAT out of that as with any sale. So of the £20 groupon send you, £3.33 has to be considered VAT still leaving you with £16.67.

Either way HMRC get all the VAT owed on the £50 which should be £8.33

As far as I can work out this essentially means that groupon get the retailers to pay their VAT. When I signed up with groupon I was told it was a good thing that I was VAT registered because I could claim back VAT. In fact the opposite is true and unregistered companies get a higher percentage of the voucher. It came as a shock when I would out how little of the voucher price I now ultimately end up with.

If this is wrong, please tell me as I would really like to find out I get more than 1/3 of the voucher price.

 

[JamieM]

Unfortunately I agree with you dance621.

I think what is actually happening in this situation is Groupon is acting as an agent and selling YOUR £50 voucher.

It doesn't mean Groupon are getting you to pay their VAT though, the customer pays the VAT, it's just who accounts for it. If Groupon did pay it then they'd pay you £41.67 minus their commission. But they send you £50 minus the commission and leave you to account for it.

You can't just pay VAT on the portion you receive as this is not technically the amount of your sale. Your sale is £50 inc VAT and then you have an expense which is deducted, commission of 50% plus VAT. The amount of Groupon's sale is £25 plus VAT so they are paying £5 VAT to HMRC.

It took me a while to get my head around this but I'm confident that's how it works and it makes sense for me now. It's just the way that commission is deducted from the voucher payment that creates the confusion. Think of it as if they didn't deduct commission but invoiced you for it later.

If anything it's a good demonstration of how overpriced they are and how unsustainable the model is. The scandal is they are making more income than you and that's income not profit. Then you have to supply the product. The frightening thing is if you sell 1,000 units on a £100 retail product, your total marketing cost is essentially £66,667. I wonder if you had that cash how many £100 units you could sell using TV ads.

That all said I'm not sure the best way to enter it in your accounts. I guess you'll invoice them £50 for the sale and they'll invoice you £30 for the commission. I'm sure it will be easy for your accountant to sort anyway.

 

[Spongebob]

If anything it's a good demonstration of how overpriced they are and how unsustainable the model is.

Absolutely.

Before long the penny will drop with retailers that Groupon represents appalling value. Already I'm getting the impression that many companies running Groupon promotions are on their last legs and that this is a desperate last throw of the dice to bring in some revenue.

What happens if the retailer goes bust before you have a chance to redeem the voucher? I guess Groupon will make a refund but if it starts happening a lot then Groupon's image is going to start taking a big hit.

My guess is that within five years we'll be asking "Whopon?" Not before a few blokes in the States have made an awful lot of money, though!

It's a bit like a Ponzi scheme.

 

[Dahu371]

I think calling it a "scandal" is a bit over the top. Businesses enter into these agreements with their eyes wide open and should be well aware of the consequences. If it turns out that retailers are selling goods below cost price then that's their lookout - little sympathy from me!

The deals work best on high-margin services, this is why a lot of them are for hotels, spas and meals. Also the hope is that the business supplying these will get repeat custom but at the full price.

But I do agree, Groupon have to be laughing all the way to the bank. Don't forget also that a significant % of vouchers are never redeemed, and it's Groupon who keep the money for this too.

One thing I would add to anyone contemplating using them. No matter what they tell you, their 50% commission rate IS negotiable. We pay 40% and I'm sure if we used them more this would be lower still.

 

[dance621]

It doesn't mean Groupon are getting you to pay their VAT though, the customer pays the VAT, it's just who accounts for it. If Groupon did pay it then they'd pay you £41.67 minus their commission. But they send you £50 minus the commission and leave you to account for it.

But that doesnt add up. If they take off VAT as source then as you say £41.67 is left of the £50. So with a 50% commission rate the payment into retailers bank would be half £41.67 so £20.83. But the actual amount that end up with the retailer is only £16.67.

This is how my accountant is handling it. I can only think that groupon have decided (and the contract signed is not clear) that groupon are entitled to 50% of the whole voucher price ie £25 AFTER Vat has been deducted. so the £41.67 becomes £16.67 after the £25 deducted. In essence they are taking commission on the VAT as well.

The way it is worded in the contact is "Success fee: 50% exc. VAT". In the small print it reads...

4.2 For any Voucher that is Validly Redeemed by a Purchaser with Partner, Groupon shall pay to Partner the Groupon Voucher Price less the
Success Fee and also less any amount in respect of Value Added Tax (“VAT”) chargeable by Groupon in respect of the Success Fee
(“Groupon’s VAT”). For the avoidance of doubt, Groupon shall retain the Success Fee plus Groupon’s VAT. That payment shall be made
within 7 of Groupon’s working days of Groupon receiving from Partner suitable and valid evidence (the nature of which may be stipulated by
Groupon from time to time) evidencing that the Voucher has been Validly Redeemed - which evidence Partner must: (i) provide to Groupon
using Groupon’s online partner redemption portal; or (ii) be sent to Groupon by post, fax or email; and for which, in both preceding cases,
such evidence must be received by Groupon within 28 days of the Voucher having been Validly Redeemed by the Purchaser of that Voucher,
with the Partner. If that evidence is not received by Groupon within that time, then Partner shall lose its right to receive any monies from
Groupon in respect of that Voucher (and Groupon may retain any monies that would have been so payable).
4.3 Save in respect of Groupon’s VAT, the parties agree and acknowledge that the payment or collection of any amount in respect of VAT (or any
fine, penalty, interest or surcharge imposed thereon) arising in connection with supplies made pursuant to this Agreement (“Partner’s VAT”),
the issue of any VAT invoice in respect of Partner’s VAT and the payment of any amount in respect of Partner’s VAT to Her Majesty’s
Revenue and Customs (“HMRC”) shall be the responsibility of Partner, as opposed to Groupon. If UK VAT law or HMRC practice changes
such that Groupon becomes liable to make any payment to HMRC for VAT (other than Groupon’s VAT), Partner agrees that Groupon may
unilaterally vary the financial provisions of this Agreement to produce the result which would have been achieved for Groupon, had that
change not occurred.
4.4 Groupon may set off against any amounts payable to Partner against any payment of any amount owed by Partner to Groupon (or to HMRC,
if HMRC does, or is likely, in Groupon’s reasonable opinion, to claim any VAT from Groupon); and any payment made by Groupon shall be
without prejudice to any claims or rights which Groupon may have against Partner.

 

[JamieM]

But that doesnt add up. If they take off VAT as source then as you say £41.67 is left of the £50. So with a 50% commission rate the payment into retailers bank would be half £41.67 so £20.83. But the actual amount that end up with the retailer is only £16.67.

It does add up. You have agreed to pay 50% of £50 which is £25 ex VAT.

They don't take off VAT at source, you account for the VAT of the full amount. It is your £50 sale, their fee is a marketing expense.

Absolutely.

Before long the penny will drop with retailers that Groupon represents appalling value. Already I'm getting the impression that many companies running Groupon promotions are on their last legs and that this is a desperate last throw of the dice to bring in some revenue.

What happens if the retailer goes bust before you have a chance to redeem the voucher? I guess Groupon will make a refund but if it starts happening a lot then Groupon's image is going to start taking a big hit.

My guess is that within five years we'll be asking "Whopon?" Not before a few blokes in the States have made an awful lot of money, though!

It's a bit like a Ponzi scheme.

I'm not sure I think the prices will just be driven down over time. The commission and the discount levels. You can already negotiate but I guess they only do if you have a great product. I doubt the big national companies are paying 50% commission too.

I think calling it a "scandal" is a bit over the top. Businesses enter into these agreements with their eyes wide open and should be well aware of the consequences. If it turns out that retailers are selling goods below cost price then that's their lookout - little sympathy from me!

Yeah I don't mean scandal in the sense it's a pre ordained scam. I just mean when you look at the overall figures on a deal it's 'scandalous', not just how much money they make but what your overall marketing cost is.

 

[stevo5678]

I completely get this now.

There are two ways, both right for VAT but one is wrong from an accounting perspective. Basically everything needs to be grossed up for commission and sales. You can simply take 1/6 of what is paid over to the client to get the correct net vat but it is skipping a few steps. The big red herring is that Groupon's vouchers are not subject to vat when they are initially sold. In my example HMRC get the correct amount of vat which is on the total sales value and everything is grossed up in the accounts.

Here is my explanantion to a client

"
The invoice is actually a contra invoice IE it is a sales invoice from SA's perspective and it is a commission invoice from Groupon's. You will need to account for it in two parts. Here are the entries for this particular invoice, note that the baking side of things is another issue

Invoice = £165.60 to be paid to SA.

PART 1

DR GROUPON DEBTOR ACCOUNT £414 (Gross sales)
CR SALES £345 (414 x 100/120)
CR VAT £69 (414 x 1/6 or 20/120)


That's the income side.

PART 2

DR Commission paid (or advertising) £207 (50% which is groupon's fees and is subject to vat)
DR VAT £41.40 (207 X 20%)
CR GROUPON DEBTOR ACCOUNT £248.40 (This is Groupon's fees gross).

This is the commission side

Groupon pay over £414 (sales) less their fees of £248.40 (inc vat) = £165.60.


VAT


You will end up with VAT due of £69.00 less £41.40 = 27.60. Which is the £414 less Groupon's gross fees £248.60 = £165.60 x 1/6 = £27.60


Groupon account

You will have the £414 due to SA less the £248.40 due to Groupon leaving the £165.60 which is received from the bank

The alternative would be to just account for the £165.60 as gross but this would not show the correct gross sales or commission paid."

 

[tuberose]

I agree that someone has to but in the example the person gave, Groupon were invoicing VAT for their fee and not VAT on the customer real cost.

 

[stevo5678]

I agree that someone has to but in the example the person gave, Groupon were invoicing VAT for their fee and not VAT on the customer real cost.

That is correct. The original sale by groupon is not subject to VAT. Check their terms and conditions.

HMRC still receive VAT of the full amount, EG:

Original sale - no vat as per groupon terms and rules for credit vouchers.

Groupon pay VAT on their fees which is £207 x 20% = £41.40.

The business suppliers pays this and then claims it back form HMRC.

However it is the business supplier, NOT GROUPON who accounts for vat on the £414. So the suppliers pays £414 x 1/6 or 20/120 = £69.

So is ultimately paid to HMRC at the full selling price (inclusive of vat). It is just that Groupon only pay it on their fees as part of this process, which makes sense as their vatable income is 50% of the total.

 

[stevo5678]

I agree that someone has to but in the example the person gave, Groupon were invoicing VAT for their fee and not VAT on the customer real cost.

That is correct. The original sale by groupon is not subject to VAT. Check their terms and conditions.

HMRC still receive VAT of the full amount, EG:

Original sale - no vat as per groupon terms and rules for credit vouchers.

Groupon pay VAT on their fees which is £207 x 20% = £41.40 when they invoice the supplier

The business supplier pays this invoice and then claims it back from HMRC as input tax.

However it is the business supplier, NOT GROUPON who accounts for vat on the £414. So the supplier pays VAT on the full sale price £414 x 1/6 or 20/120 = £69.

So VAT is ultimately paid to HMRC at the full selling price (inclusive of vat). It is just that Groupon only pay it on their fees as part of this process, which makes sense as their vatable income is 50% of the total.

HMRC get 41.40 from Groupon but the supplier claims this back in input tax. The supplier then pays vat on the full SP of £69.

Groupon has paid vat on their income, and the supplier has paid vat on their income and HMRC have received the full vat.

The supplier shows the income in their accounts of £414 less £69, and also shows the commission paid to Groupon of £207 (net of vat).