VQOTW: Agency Status and Impact on VAT Turnover

My client is a landscape gardener trading as a limited company and is not currently registered for VAT. He purchases expensive plants chosen by his customers and supplies these on as part of his landscaping work; however, the company is approaching the £85000 VAT registration threshold. In order not to have to register for VAT he has begun to ask his customers to pay for the plants purchased from the nursery, but the nursery still invoices him. He believes that the plants then don’t count towards his turnover because he isn’t buying and selling them, but I’m not so sure! Is he correct?

It sounds as though your client is trying to achieve the outcome of being a disclosed agent. Supplies made through disclosed agents are those where both the purchaser and the supplier are known to each other and the agent brings about the transaction in his customer’s name, getting involved to a greater or lesser extent, which may include arranging payment or delivery. A disclosed agent ‘stands back’ from the transaction and the supply that he arranges is not made to him or by him, and therefore is not part of his turnover. Any charge made to the customer for the agency services would count as turnover.

Supplies made through an undisclosed agent are those where the supplier and purchaser are not known to each other as the agent acts in his own name. As it stands, the nursery is not aware that it is selling to the end customer, and is invoicing your client, presumably believing that he is their customer. Supplies of goods through an agent acting in his own name are treated as to him and by him and consequently count towards his turnover for VAT registration.

In order for your client to be able to treat the supplies of the plants as being between the nursery and the customer, rather than as being bought and sold by him, he would need to act as a disclosed agent. This is a contractual matter between the parties, evidenced by their agency agreement, but it is important that the agreement reflects reality. For example, if your client is contracted to provide the full landscaping service from design to execution, it is likely to be seen as artificial for the plants to be bought separately by the customer, and thus open to challenge by HMRC. If, on the other hand, your client is just engaged to plant trees and shrubs chosen by the client and they ask him to obtain the goods, a disclosed agency agreement would seem more reasonable.

VAT Notice 700, in section 22, sets out what HMRC considers to be the indicators of agency as follows, but it is important to remember that these are only indicators, and all the facts must be considered fully:

  • the agent must have agreed with the principal to act on their behalf in relation to the transaction either by a written or verbal agreement
  • the agent must be able to show they are not trading on their own account
  • the agent will not own the goods, and
  • the agent will not alter the value of any supplies made between the supplier and their principal.

Further guidance on acting as an agent is covered in sections 23, 24 & 25 of Notice 700.


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Arti has worked in VAT since 2004 spending 11 years with HMRC. During her time in the department she was a visiting officer, a business records check officer providing educational visits and spent the last three years on the Alcohol Fraud team where she gained a good understanding of civil penalties and appeals. In addition she was an IT specialist providing support to colleagues and an associate trainer delivering VAT and Penalties training.

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