Affiliate Networks and VAT

[enterprise_seo]

Tweet

I'd just like to stir things up a bit by asking about VAT and the attitudes towards paying VAT by networks to affiliates who are already registered because their income is above the registration threshold (i.e. they have a solid business, they are professional marketers and are doing quite nicely, thank you very much).

Some networks acknowledge that an affiliate is VAT registered and so pay VAT on top of the commission as a matter of course.

However, some do not. What that means in effect is that I will then have to "gross down" my earnings, effectively reducing my commission by 15% (or whatever the prevailing VAT rate is).

But this is crazy. Don't the networks realise that all they have to do is just claim back the VAT that they've paid to the affiliate at the end of the current quarter and they'll get all that money BACK from HMRC???

Example: Whenever I buy software from a VAT registered source or outsource to a VAT registered person I receive the invoice and pay the money due to them including the VAT. Then at the end of that quarter I submit my VAT return and within about 10 days I get the VAT back into my bank account automatically.

Paying VAT to affiliates doesn't mean that you LOSE that money!

By not paying VAT to affiliates who are registered, networks are not losing money. They are simply cutting 15% off their affiliates' earnings, thereby encouraging their affiliates to join another network which does pay VAT.

So networks who want to attract good, professional affiliates (who like to do things properly) should all pay VAT. And if they don't they should change their policy pronto or end up losing all their good people to networks that have grown up!

I'd be interested in the response to this by networks and affiliate managers.

Thanks for reading this,

EntSEO

[Hero]

I think the vast majority of UK networks allow UK affiliates to specify their vat number so that the self billing invoices calculate it and their payments include it. Webgains certainly does.

[MagicFreebiesUK]

yeh, haven't had a problem with any networks and paying me VAT.

What networks you having probs with?

[enterprise_seo]

Well, I don't think I should name names here. But some of the more specialised financial CPA networks do not pay VAT on affiliate commissions.

The same networks also do some other odd things as well, so maybe they aren't yet up to speed. I think they mean well:-)

Perhaps they don't realise that they can just claim all that VAT BACK from HMRC.

Hopefully the people involved might read this post soon, so I'll say it again:

YOU JUST CLAIM ALL THE VAT BACK FROM HMRC.

YOU DON'T LOSE ANY MONEY BY PAYING VAT TO AFFILIATES.

I live in hope....

[vatquestion]

That means that they have to become VAT registered which in turn means they have to charge their clients VAT where previously they didn't.

Some clients who aren't VAT registered will then prefer a network who doesn't charge VAT and will move custom elsewhere - its a big spiral.

And the solution is not for everyone to become VAT registered as it is a tricky thing especially if you get something wrong. When you struggle with the accounts coping the VAT returns can be even more daunting.

Correct me if I'm wrong?

[Mogga]

I remember something about some finance networks when I registered for vat first. They don't pay it. I did get an explanation at the time but can't find reference to it.

Ask one of them why, I'm sure they'll explain it.


It has been mentioned before:
http://www.affiliates4u.com/forums/f...leads-vat.html

[Barry]

I have a few gambling related merchants who dont pay VAT mainly because they operate out of a tax haven.

If I ever get any money from a merchant who does not either require me to send them a VAT invoice - ie they just send the cash or sends me an self invoice without VAT - I simply dont include it in my VAT calculations - I cant pass VAT onto the taxman if I dont get it in the first place. Its upto the taxman to go after whoever has not payed me IMO.

Ta

Baz

[enterprise_seo]

If the company is outside of the EU and not registered for VAT then the question of VAT is left out completely.

But the network needs to explain this fully to the affiliate, otherwise the affiliate may assume that s/he has to take a hit on the 15% (actually it's 13.04% to be exact).

If the question of VAT does not arise then the affiliate simply pockets the full amount payable, in the same way as you wouldn't deduct 15% (or 13.04%) from your earnings from Google Adsense and give it to HMRC).

This is actually good news for everyone, but the network needs to TALK to the affiliate if asked about it. The network I was involved with at that time, and with this specific issue, just did not reply to my support emails about VAT apart from saying that they didn't pay it (which I kinda knew anyway).

Had they explained WHY they were VAT exempt I could have then carried on with a clear conscience.