VQOTW: Agents for Unregistered Principals

My client is an agent and acts for some quite small music businesses.  He is VAT registered, but most of the businesses he acts for are below the VAT threshold and have no wish to register on a voluntary basis.  He has an agency agreement in place with the musicians under which he finds them jobs in clubs and at private and corporate events, and he charges them a fee based on the value of the job.  When potential customers visit his website to look for a suitable performer, the site is quite clear on the point that he is an agent, and they clearly know who the musician is; however, he invoices the customer in his own name, not in the name of the musician.  Does this mean that the customers have to pay VAT even though the musician they choose may not be registered?

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A. Where an agent chooses to act in his own name, rather than in the name of his principal, VATA1994 section 47(2A) stipulates that in the case of a supply of goods, the supply shall be treated as a supply to and a supply by the agent; in effect treating him as though he is principal.

In the case of a supply of services, section 47(3) says that the supply may be treated as a supply to and by the agent, so is discretionary.  In practice, this means that the supply can be treated in that way as long as

  • Both the principal and agent are registered for VAT, and
  • The supplies are taxable.

As a supply involving an agent is still commercially between the principal and his customer, the involvement of the agent should not result in VAT being charged where the principal is not registered.  The best way to achieve this, in view of the fact that the musician does not need to remain anonymous, is for your client to issue the invoices in the name of the musician, or, if he insists on invoicing in his own name, to show on the invoice that it is being invoiced on behalf of the named musician.

Obviously if HMRC were to undertake a VAT inspection, the agent would need to be able to demonstrate that where no VAT is charged on invoices in his name, it is a supply invoiced on behalf of an unregistered principal.  This evidence may take the form of a standing agreement between the agent and musician, or could be a signed declaration from the musician giving their name and address, details of the services being supplied and stating that they are not VAT registered. As the supplies of services by unregistered principals are not treated as made to and by your client, if these invoices form part of your client’s records, they should be distinguishable from invoices for your client’s own supplies on which VAT will be chargeable.  Your client should issue a separate VAT invoice to his principal for his fee and account for output tax on this in the normal way.


If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.

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Senior VAT Consultant
0844 892 2470


Viv has worked in VAT since 1989, when she joined HMRC as an Assurance Officer. Before joining the team as a consultant in 2000, she had spent five years dealing with written and telephone enquiries at a local VAT office.

In 2007/ 2008, she spent a year with a major accountancy firm gaining experience of VAT from a different perspective and developing skills which are relevant to her current role.

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