FRS 5, Agent & VAT

Cubed

First post here guys, I am looking for some input if possible on interpretation of FRS5 Revenue Recognition and VAT.
I will first briefly describe the nature of the business:
-My Company will act as an agent/intermediary in the arrangement of tuition.
-Large Company X will pay me €1,000 (fixed fee) for arrangement of tuition of a customer of theirs (7 tuition lessons), I will then outsource the seven tuition lessons to a non connected 3rd party for €800, my company retaining €200 for its service. I will play no further part in the tuition or have any liabilities in any way.

FRS5: http://www.frc.org.uk/images/uploade...nts/ACF562.pdf (page 23)

"In contrast, where a seller acts as agent it will not normally be
exposed to the majority of the benefits and risks associated
with the exchange transaction. Agency arrangements will
typically include the following characteristics:
(a) the seller has disclosed the fact that it is acting as agent;
(b) once the seller has confirmed its customer’s order with a
third party, the seller will normally have no further
involvement in the performance of the ultimate
supplier’s contractual obligations;
(c) the amount that the seller earns is predetermined, being
either a fixed fee per transaction or a stated percentage of
the amount billed to the customer; and
(d) the seller bears no stock or credit risk, other than in
circumstances where it receives additional consideration
from the ultimate supplier in return for its assumption of
this risk."


It is my interpretation that I am indeed acting as agent and should only record turnover of €200 and most importantly am only liable to VAT on the €200 and not the €1,000.

The type of tuition itself is liable at the reduced rate of 13.5%, I am still unsure if my "Agency" will be liable at 13.5% or 21%


Any help or opinions appreciated, thank you

ants09

not being smart but what tuition will you be providing ? educational etc

when will these tuitions be provided ? ie at what time is the 7 tuitions take place

will the 3rd party be vat registered ?

Cubed

the time frame will be up to the customer and the subcontracted teacher/instructor, whatever suits them both, could be one week, could be 10 weeks...

the 3rd party may or may not be VAT registered ... they may be trading below their required threshold

SBWife

What happens if the third party does not provide the service?

SBWife

SBWife wrote: »

What happens if the third party does not provide the service?

Any disputes over service will be between the third party and customer not the agency

Cubed

Deleted User wrote: »

Any disputes over service will be between the third party and customer not the agency

correct, this will be written into the agreements

ants09

what type of courses will you be providing ?

Alan Shore

I wonder if your view that you are an agent is correct.

I think that where a course provider engaged you to sell their courses you could be considered to be an agent of theirs ie you find customers for them and collect payment and take a cut.

But where you are offering a service where you source tutors for your own customers are you not just subcontacting out the work. Sales €1000 purchases €800.

On the VAT if its a 13.5% service then the tutor will charge you 800 + VAT and you can recharge the customer 1000 + VAT for the provision of tuition services.

Cubed

I would be classed as an agent of theirs as i will be acting entirely on their behalf and in their name, i guess its a similar situation to a travel agent in some ways.
A lot of the tutors the work will be outsourced to will not be VAT registered which means no input credit for me... the crux of the problem really