Paying VAT to affiliates

[vatquestion]

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I am a non vat registered limited company with a small turnover under £35,000 a year. Our profit margins are very small (around 3-5%).

Am I obliged to pay VAT to VAT registered affiliates because I would then be making a very large loss and I wouldn't be competitive if I reduced the payout rates low enough to add the VAT on top as then the Non-VAT registered affiliates wouldn't be interested in working with us.

Majority of the income comes from the US so even if we became VAT registered ourselves we wouldn't get paid VAT on it.

Where do I stand legally and what is the situation if I put in the terms commissions inclusive of VAT?

[Barry]

You will have to pay any affiliate who is VAT registered VAT - as they are legally obliged to charge VAT on their invoice to you.

If you became VAT registered you would still not have to pay the VAT on your US incoming cash to the taxman as there will be no VAT in it to account for.

Is there any particular reason why you cant register for VAT?

Ta

Baz