Q:
Hi
I’m new to the forum so I hope my question hasn’t been asked before.
My query relates to the raising of VAT invoices with regard to an agent/principle relationship.
My understanding from notice 700 is that where an agent (in this case a music agent) is acting as agent between a third party (promoter) and principle (band) i.e. is raising a contract between the promoter and the band then the principle MUST raise the VAT invoice and either, pass to the agent to forward onto the promoter or send direct to the promoter.
At the present time I know of a situation where the agent is raising a contract between the promoter and band but is also raising the VAT invoice on behalf of the band. Will HMRC be happy about this? – is there a situation wher this would be acceptable? If its not acceptable what are HMRC likely on an inspection?
A:
Hi Denlian
When you say that the agent is “raising the VAT invoice on behalf of the band”, I assume that you mean that the agent is physically preparing the invoice on behalf of the band and issuing it to the promoter?
If that’s the case, then I don’t see it as a problem, as long as all of the parties involved are accounting for the correct amount of VAT on their VAT returns. I understand that in the entertainment industry, it’s common practice for agents to take care of this sort of stuff for their client and there are many situations in other businesses when agents raise the invoice on behalf of their clients. A good example would be property management, where land agents issue regular invoices for rent or other property costs on behalf of landlords
It is a valid point to raise though, because of course the band is always responsible for its own VAT affairs, even if the agent has taken over the administration of their accounting and tax affairs for them. But HMRC probably wouldn’t be concerned as long as the correct information is shown on the invoice and that the VAT is correctly accounted for on the bands’ VAT return.
Marie
Q:
Hi Marie
Yes the agency was raising the invoices on the bands behalf. However, the invoices were not consecutively numbered i.e. the numbers were related to the contracts the agency issued to performers so one number might be 778 the next might be 988. The invoice date was sometimes shown in american format i.e. month/day/year rather than day/month/year so all confusing.
Also the agency did not operate the reverse charge procedure for B2B shows that were performed in the EU. In fact they didn’t seem to be that aware of the procedure.
The band now issue their own invoices and have these passed onto the promoter.
It seems odd that what happens in practice seems to go against what the VAT regs say – but I guess if everything was by the book it might make life too easy!
Thank you very much for you input Marie, I must admit there is a lot of useful reading on the forum (yes I know – I need to get a life!!
Best wishes and have a good Christmas
A:
Hi Denlian
You make a good point about the invoicing as there are actually regulations that require businesses to issue invoices in sequential number etc. I’ve never known HMRC to penalise a business because of failing to do this, but I’m sure that it has happened. It’s also important to get the B2B reverse charge VAT done – strictly speaking failing to do so is an underdeclaration of VAT on the return even if the VAT is fully recoverable. The penalty regime now takes into account the business’s compliance history and these are the sorts of things that go against the business.
As for commercial practice going against the VAT regs – well remember that the French invented VAT so we can blame them for that!
Thanks for your involvement on the forum this year and I hope to hear from you again soon.
Have a great Christmas and New Year!
Marie