- Original Poster
- #1
I know this is a somewhat complex area and of course for an actual agreement I would seek professional advice but I am trying to understand the possible scenarios in which a profit share is VAT exempt.
From reading some HMRC guidance it seems to me that a 'true' profit sharing agreement is VAT exempt/out-of-scope but a lot of profit shares are really payment for services and not VAT exempt.
Consider the following example:
- ABC Ltd enters into an agreement with XYZ Ltd whereas employees of ABC Ltd undertake business in XYZ Ltd's name. i.e. all invoices are in the name of XYZ Ltd.
- What I mean is ABC Ltd is providing all the equipment i.e. people, office space, computers, knowledge, etc but XYZ Ltd invoices the clients i.e. the clients only ever see XYZ Ltd and know nothing about ABC Ltd.
- ABC Ltd receives say 75% of profits
is that payment VAT exempt? If not who is providing a service to who?
does this changes if the services provided by Firm XYZ are VAT exempt or VAT out-of-scope?
From reading some HMRC guidance it seems to me that a 'true' profit sharing agreement is VAT exempt/out-of-scope but a lot of profit shares are really payment for services and not VAT exempt.
Consider the following example:
- ABC Ltd enters into an agreement with XYZ Ltd whereas employees of ABC Ltd undertake business in XYZ Ltd's name. i.e. all invoices are in the name of XYZ Ltd.
- What I mean is ABC Ltd is providing all the equipment i.e. people, office space, computers, knowledge, etc but XYZ Ltd invoices the clients i.e. the clients only ever see XYZ Ltd and know nothing about ABC Ltd.
- ABC Ltd receives say 75% of profits
is that payment VAT exempt? If not who is providing a service to who?
does this changes if the services provided by Firm XYZ are VAT exempt or VAT out-of-scope?
