VAT invoicing for managing advertising

[PrintedOut]

I currently publish a magazine and am looking to expand by managing the advetising of other publications which currently don't make a profit.

I would take over their advertising, keeping any revenue and I would print the publication with the cost coming from the revenue.

Ideally I would invoice the advetisers directly, but for any advertising already booked I would have to invoice the current publisher.

How would this work in terms of vat and invoicing? If I'm printing it using the ad revenue do I need to invoice the publisher for anything? And if they already have ads booked, can I invoice them for that revenue?

 

[Scalloway]

If you are acting on behalf of the other publisher my opinion would be that you should charge them a nominal sum plus VAT to keep things straight. The reason for this being that I have read of businesses being liable for the full amount of VAT in similar situations where no charge has been made.

 

[PrintedOut]

If you are acting on behalf of the other publisher my opinion would be that you should charge them a nominal sum plus VAT to keep things straight. The reason for this being that I have read of businesses being liable for the full amount of VAT in similar situations where no charge has been made.

Thank you for your reply.

What would I charge them for? If I charged a nominal amount for print that's zero-rated, so no VAT or would I do a nominal charge for something else?

 

[Scalloway]

I would still invoice for a nominal amount just to make clear what is going on.

 

[Lavender2306]

I currently publish a magazine and am looking to expand by managing the advetising of other publications which currently don't make a profit.

I would take over their advertising, keeping any revenue and I would print the publication with the cost coming from the revenue.

Ideally I would invoice the advetisers directly, but for any advertising already booked I would have to invoice the current publisher.

How would this work in terms of vat and invoicing? If I'm printing it using the ad revenue do I need to invoice the publisher for anything? And if they already have ads booked, can I invoice them for that revenue?

Hi PrintedOut,
If I could ask you to clarify the business transactions you described in your posting, please.
When you say you take over the advertising of other publications, do you mean the ads would be published in your magazine?
What do you mean by keeping any revenue? Who keeps the revenue from these ads? Your magazine or those publishers?
How I understand these arrangements:
An unprofitable publisher B invoices an advertiser C for the advertising revenue of, say, £10K.
Then you and B come to an agreement that your magazine would deal with all the ads and receive the whole advertising revenue of £10K and for that you print the publication of the B. This printing service costs you, say, £2K.
If my understanding of the arrangement is correct, you should invoice the publisher B for the advertising £10K, standard rated supply of services.
Also, you should charge for the printing of the publication, £2K. But this sale will be a barter sale where you provide the services to the publisher in return for the transfer of the advertising contract to you. Therefore B should invoice you for some kind of middle man services for £2K, gross.
This is how you should invoice the publishers who transfer to you their advertising contracts unless of course you are able to deal with the advertisers directly.
Please, let me know your thoughts.

 

[PrintedOut]

Hi Lavender,

Thanks for your reply too.

The actual adverts would stay in their respective publications but I'd be selling the advertising and invoicing the advertisers myself and keep any renvue from selling this advertising in addition to any that has already been booked.

I'm also a print reseller so the deal would be that I'd print each publication through my business and no money would be due from the publishers as the advertising revenue would pay for it.

Sorry, I know it's quite complex but hope that makes sense?

 

[Lavender2306]

Hi Lavender,

Thanks for your reply too.

The actual adverts would stay in their respective publications but I'd be selling the advertising and invoicing the advertisers myself and keep any renvue from selling this advertising in addition to any that has already been booked.

I'm also a print reseller so the deal would be that I'd print each publication through my business and no money would be due from the publishers as the advertising revenue would pay for it.

Sorry, I know it's quite complex but hope that makes sense?

Hi Printed Out,
Thank you for clarifying the arrangements.

Where any advertising has already been booked,
the invoicing as suggested in my previous posting stands.
Whether the ads are printed in your magazine or they stay in these publications does not change the nature of your business transactions with these publishers. The fact is that you provide services to the publishers: sell the advertising they've booked and print their publications.
Both of these services should be invoiced. Even if you are providing services for free, which you are not, HMRC would expect you to account for income at a cost. Is this making sense?
So when you say that no money would be due, this means that the publishers expects you to provide printing services in exchange for the overtaken advertising revenue. Do you agree?
So you will get your advertising revenue, £10K, then spend £2K printing the publications , and if this is all accounted in one business, you would also have deemed income of £2K which would be
negated by the publisher's invoice for £2K. Thus your gross profit from these transactions would be £8K. This is how the invoicing should be in principle,

 

[PrintedOut]

Yes, think I'm with you.

So with the advetising, I invoice either the advertiser or current publisher depending on whether it's already booked or a future booking.

I then also invoice the publisher for the print cost £2k (zero rated for vat) but the publisher invoices me for £2k inc. VAT?

To make it simpler could I put something like 'Published on behalf of B' in the magazine so effectively I 'own' it I am just using their content? Or is that making things even worse?

 

[Lavender2306]

Yes, think I'm with you.

So with the advetising, I invoice either the advertiser or current publisher depending on whether it's already booked or a future booking.

I then also invoice the publisher for the print cost £2k (zero rated for vat) but the publisher invoices me for £2k inc. VAT?

To make it simpler could I put something like 'Published on behalf of B' in the magazine so effectively I 'own' it I am just using their content? Or is that making things even worse?

Hi PrintedOut,
First of all, I would like to say that my suggestions on how the invoicing in your case should be are just general principles, as far as I am aware. I don't know exact details of your agreement with the publishers, and I could not give you detailed advice for that reason.
But speaking in general, with regards to the printing service you provide to the publishers, there is an exchange of benefits btw you and the publishers: you get the advertising revenue and they get their publications printed. Therefore this is a barter.
This is the answer to you second question. Even if you are doing just a favour to the publisher, making a gift, you will still be required to account for a deemed income, at least at a cost, from this printing.
You could of course hope that HMRC will not notice, will not question this arrangement and you just write off the cost of the printing without accounting for income. But this is not the expected accounting practice. You will need to justify your printing service to the publisher.

With regards to your 1st question, the invoice for £2K from the publisher could be gross or net amount.
If the invoice is gross, I.e. £2K including VAT, then the cost to you will be £1.67K and you can recover full VAT, even with partial exempt status this service, middleman service, is directly related to the advertising revenue. But in this case the actual cost of the printing will not be negated in your books and this will reduce your accounting profit.
From the publisher's point of view, the less VAT they have to pay on this transaction the better.
So from this aspect it will be better for them to invoice you £2K gross.
As you can see there are a number of things you need to consider before deciding how to invoice these transactions.
It would be interesting to know what you decide. Thanks.

 

[PrintedOut]

Just been thinking this over and trying to figure out still the best way forward but realised I didn't make something clear - the printing would be invoiced to me by the print company I use so any relevant VAT is accounted for (in this case, zero-rated).

So, if I invoice advertisers for their ad space and the publisher a management fee, can I then just deduct the cost of print from the revenue I've earned from advertising and leave the publister out of the print side of it?

 

[Lavender2306]

Just been thinking this over and trying to figure out still the best way forward but realised I didn't make something clear - the printing would be invoiced to me by the print company I use so any relevant VAT is accounted for (in this case, zero-rated).

So, if I invoice advertisers for their ad space and the publisher a management fee, can I then just deduct the cost of print from the revenue I've earned from advertising and leave the publister out of the print side of it?

As I understands, a printing company does the printing and you just pass the printing services on to the publisher. I don't see how this can be classified as management services. This printing is 100% on behalf of the publisher, is not it?
We are not talking about the advertising revenue that you invoice the advertisers directly.
But the advertising that has already been booked, which means, as I understand, invoiced by the publisher to the advertisers, in order for you to account this income you will need to invoice the publisher for it. Am I right? Then the managing fee is invoiced on the top of the advertising revenue. Am I making sense?

 

[PrintedOut]

Not 100%. 60% of the publication would be advertising which I've invoiced for (either directly to advetisers or through the current publisher for those who've already booked) and revenue I've received, so surely the cost of printing that at least is down to me? With the 40% left for content, the current publisher and I would provide between us.

With my current magazine, I invoice advertisers which pays for the whole magazine to be printed, covering the cost of content pages which I either write myself or are submitted by local contributors. Content is free in this case. Is this not the same, or am I misunderstanding it entirely?

 

[Lavender2306]

Not 100%. 60% of the publication would be advertising which I've invoiced for (either directly to advetisers or through the current publisher for those who've already booked) and revenue I've received, so surely the cost of printing that at least is down to me? With the 40% left for content, the current publisher and I would provide between us.

With my current magazine, I invoice advertisers which pays for the whole magazine to be printed, covering the cost of content pages which I either write myself or are submitted by local contributors. Content is free in this case. Is this not the same, or am I misunderstanding it entirely?

When you invoice for advertising revenue, of course you are right to write off to P&L any related expenses.
In the case when you provide printing services, even as a middleman, to the publisher, I think you can't write off costs without invoicing the publisher who benefits from this printing.
As I understand, 60% of costs is related to advertising and 40% of total costs is to other material printed on behalf of the publisher with your contribution. You could try to use this your contribution to justify management fee, but I am not sure. I personally don't think this should be invoiced as management fee.